Personal Finance Mistakes Grads Make on Their First Job
June 21, 2017
Graduation season is here and young adults will soon enter the workforce. Now, these professionals will need a strategic plan to stay ahead of their finances. In an interview with Financial Advisor Magazine, wealth management advisor Pearce Landry-Wegner recently shared his insights on common personal finance mistakes new grads make on their first job, and solutions for each. These include:
Not setting up a repayment plan for student loans
Recent grads can forgo student loan payments during a six-month grace period after graduation. During this time, it’s critical they review and set up a repayment plan. Also, there are options for student loan forgiveness through public service. But it is important they know which employers fall within this realm to ensure loan forgiveness.
Not keeping fixed expenses as low as possible (e.g., rent, car, gym, cable)
Additionally, to avoid debt, recent grads should keep living expenses to 25 percent of a paycheck. If necessary, there are ways to negotiate pricing with some cable and internet providers to keep these costs low.
Not saving enough
Recent grads can work with their bank to schedule a recurring payment deposited directly into a savings account. This helps with the overall saving process. To make it easy for the employee, most companies can divide a paycheck and deposit the funds into different accounts. Also, to help build an emergency fund and pay down debt (student loans, credit cards, etc.), it’s important to put half of all bonuses directly into the bank.
Not signing up for the 401k/retirement plan at work
Often times, recent grads don’t understand how to plan for their retirement. As a first step, there are many forms that allocate a percent or fixed dollar amount for retirement from each paycheck. This allows for retirement funds to grow steadily, and the percent option can automatically increase with every raise.
Not reading the benefits package and understanding new medical coverage
By reading the medical coverage thoroughly, recent grads can tell whether their primary doctors are covered and whether they’ll have an increased co-pay. From here, they can take the necessary steps to either switch physicians or explore their options for independent health plans.
Not checking the job’s disability insurance
If disability insurance is offered by the new employer, recent grads should pay the premium after taxes so that the benefits will be tax-free (if they’re needed).
To read about more personal finance mistakes recent grads make, click here.