You did it! Your days of 8AM classes and cramming for final exams are over, now what?
There are so many things that college doesn’t prepare you for, like what’s a 401k and how does it work? How am I going to save for my future? How do I pay off this massive student loan balance? These are things that most likely didn’t cross your mind while you were in school, but now that you have your diploma, and you are out in the “real world” these questions surface and can become quite stressful.
Once you begin working and you start to make a steady income, a few things will become a little clearer. These things include how much your fixed monthly expenses (like rent, utilities) are and how much you tend to spend on other things like food, entertainment, and late-night shopping sprees when you can’t sleep.
For some people, building a budget is easy and for others it could be a major wake-up call. If you have student loans, it is crucial to get those paid off as soon as possible. If you have private or federal unsubsidized student loans that interest is going to continue to snowball and create unwanted headaches. For a lot of borrowers there is a grace-period after graduation (usually 6 months) where you aren’t required to make a payment, however like I mentioned before the interest will continue to grow and grow. It would be smart to start paying your student loans off as soon as you can, even if you are still in a grace-period. This will help a few things:
- Will control the accumulation of interest/begin paying down the principal.
- Build a positive habit (before you are forced to start making payments).
Investing and saving is just as important as paying down your debt. Between rent, utilities, and now a student loan payment you might be thinking that your wallet can’t be stretched any thinner. However, having a strong nest egg will only be beneficial. Life happens, and unexpected expenses come up. These can be detrimental to someone who doesn’t have funds set aside as they may be forced to rack up a credit card balance, eat into their retirement accounts, or fall behind on other payments. Even putting $50-$100 per paycheck into a savings account will make a huge difference.
Let’s get into investing. There is a good chance your employer will have some sort of retirement plan available for you (i.e. 401k plan). It is important to take advantage of these, especially if an employer match is offered. If you really want to go hard on saving for retirement, or your employer doesn’t offer a plan than opening a Roth IRA is a great option. You will be investing after-tax dollars, and essentially receive tax-free distributions on the dollars you put in, and the growth inside the account when you retire. Taking advantage of this benefit while you are young will be very beneficial come retirement!
Retirement accounts like a 401k through your employer and Roth IRAs can be very confusing as there are a lot of rules and regulations on top of picking what you want to invest in. This is where we can help! Everyone’s situation is different, and there is no “one-size-fits-all” plan. At PrairieFire we look to build strong relationships to get a better understanding of your goals and needs to help you plan for your future. Please contact us, if you have any questions, or would like to schedule a call!
