emergency savings

Financial Advice for College Graduates

June 28, 2016 By Amanda Blankenship 1 Comment

Many students walked across stages at their universities last month to receive their college diploma. These students were stepping across the stage towards their futures, their blossoming careers and, for some, crippling financial struggles.

Seven in 10 college graduates (about 69 percent) graduates with over $28,000 in debt. As if this isn’t enough, most college graduates are also setting out to begin paying all of their own bills for the first time and taking charge of their personal finances. If this is you, don’t worry. There are a few things you can take note of to keep control of your finances in this new chapter of your life.

Pencil out a budget. Using pencil is a key here. During the first few years out of college, many graduates change jobs. They sometimes make more money (or less) and their budget has to be adjusted. Drawing up a budget and sticking to it is important for overall financial wellness.

Begin retirement planning with your first job. With the first job you get out of college, you should begin planning for your future (if not before then). You can set up automatic withdraws from your paycheck and stack up money in a 401(k) or Roth IRA for retirement. Oftentimes, if the company has a retirement savings plan (like a 401(k)), your employer will match your contribution. You will also get a tax break on the money you put into your retirement fund.

Know the value of your money. When you look at purchases, you should think about how much time it took you to make that money. For instance, if you are thinking about buying the new FitBit watch for $300, think about how many hours it takes you to make that money. If you make $15 per hour, you would have to work for 20 hours to get that FitBit watch. Is it worth it?

Don’t be afraid to move back in. Moving back in with your parents is something almost every college student fears. If you’ve been in a dorm for four years, moving back in with mom and dad can seem like a drag. You go from having all the freedom in the world to having to follow your parent’s rules again. However, you can benefit from moving back home. Taking up residence at your parent’s house can help you save money, give you time to focus on finding the job you want and can also be a nice change of pace from the hustle-and-bustle that was university life. Don’t worry. You won’t be there forever.

Don’t use your credit card as a default payment method. Lines of credit should only be used when it is necessary or when you know you can pay the bill in full. For instance, many people use their credit cards for their day-to-day purchases to rack up rewards. This is perfectly acceptable if you don’t overspend. Simply purchase the things you would always purchase with your credit card and then pay it off in full each month.

You have to have an emergency fund. Having money set aside for emergencies is a must! The loss of a job, car repairs and some medical bills can’t be foreseen. If you have money set aside for these unexpected costs, you won’t have to go into debt paying for emergencies. The ideal emergency fund would have at least $1,000 to $2,000 in it.

Continue learning. Even though you are done with college, you should never stop learning, especially when it comes to your finances. Pick up a few finance-related books, take a finance class or find a financial advisor to help educate you about saving and investing. Never stop learning and educating yourself.

Splurge a little. While saving and planning are important, you should also splurge a little bit of money on experiences while you are young. Many students take the summer after college to travel. If you have the opportunity to do so, you should. Don’t be afraid to spend money on experiences.

What advice would you give to new graduates?

Photo: Flickr: John Walker

Should You Pay Your Debt Before Saving?

June 14, 2016 By Amanda Blankenship 2 Comments

Eight in 10 Americans are in debt and two out of three Americans wouldn’t be able to cover a $1,000 emergency if one presented itself. The solutions to these problems seem simple: pay your debt off and save your money; but which should be done first?

The answer to that question depends on what your long-term financial goals are and how prepared you are to begin paying and saving. There are a lot of factors that come into play when making the decision between paying off your debts and saving.

Emergency savings

Before settling on paying off your debt, you should make sure to have an emergency fund. Things like emergency car repairs, medical bills, last-minute trips, etc. happen. You need to have money set aside in case something happens. Don’t be discouraged if you don’t have an emergency savings account in place. Most Americans wouldn’t be able to cover a $1,000 emergency if they needed to; however, it is a good idea to have an emergency fund in place. If you are looking to pay off debt, be sure you have at least $1,000 in savings first.

How much debt do you have?

If you are wondering about paying off your debt, you should take a look at your debt as a whole. How much do you have? What lifestyle changes will you need to make to pay it off? How much is your debt costing you? Many credit cards and loans have a substantial amount of interest tacked on to it. Once you have emergency savings in place, you should begin to pay off your debt by level of importance. Credit cards and loans with higher interest rates should be paid off first. This will prevent you from throwing out a ton of money on interest.

Earnings on your savings

Another thing to keep in mind when you’re trying to decide whether you should pay off your debt or save first is how much you will earn from your savings. If the interest on your savings account is higher than the amount of money you are paying in APR on your debt, save first. This situation is highly unlikely though. Most banks and credit unions have seen a significant decrease in the amount of interest they are paying out on savings accounts.

Check out your 401(k)

If the APR on your credit card isn’t high, you may want to look into a retirement savings plan or 401(k). Many employers match a certain amount of the employee’s contribution to the plan. If you’ve got your emergency savings set aside and no urgent, high-interest debt to pay off, you may want to see how much more money you need in your 401(k) to get your employer to match you. This is almost like having someone else save your money for you.

Financial goals

All in all, you should have a bottom line when it comes to your financial goals. If you are aiming to improve your credit score, you will want to pay off your debt before saving. If you want to improve your investment portfolio, you will want to put off paying off your debt and focus on your investments. If you have a goal for saving for something (i.e. a house, car, college, etc) and you don’t have any urgent debt, you will want to begin to save money by placing it in a high-interest savings account.

Making the decision about whether you should pay your debts or save first can be difficult. Keep your long-term financial goals in mind and take the road that will lead you to them.

Do you have a story about choosing to pay off debt or save first? Let us know. We’d love to hear from you!

Photo: Flickr: alamosbasement

Four ways to make Saving Easier

November 14, 2015 By Amanda Blankenship 1 Comment

Saving can be such a chore. Chances are, you are making it a lot harder on yourself than it needs to be. There are a few steps, tip and tricks that you can use to making saving money, whether it be taking advantage of available apps or simply talking to an advisor, there are probably a few things your not doing to make saving easier.

Track your monthly spending

Many checking and savings accounts have applications you can use for their services. The apps give you a “snapshot” of your monthly spending, what weeks you spend more, whether you’re spending most of your money on entertainment, food, bills. When you track your monthly spending, you can identify places where you can slim down (like eating out) and place the extra money into savings.

Flexible spending

A flexible spending account may be a possible way to save as well. Flexible spending accounts (FSA) take advantage of money you set aside from your paychecks. With each pay period, a set amount of money comes out of your check (tax free). You can use a FSA for medications, co-pays, and you can even use the account for commuting costs to and from work. The best part about an FSA is that you are paying with pretax dollars rather than after-tax dollars and essentially getting a discount on things that you normally buy anyway.

Begin contributing to retirement

Saving is always better when you are saving for something specific, and what better thing to save for than your own retirement? Workplace retirement plans, such as 401(k), allow your retirement investment to grow without being taxed. You can set up a specific amount of money to come out of your check every week and it goes directly into the 401(k), untaxed. Some companies will even match a percentage of your 401(k) contribution.

If your company does not offer 401(k), you may want to check into an individual retirement account. If you have earned income, then you can contribute to an IRA (up to $5,500 a year if you are under the age of 50). You can choose different types of IRA accounts to invest in as well: commodities, individual stocks, certificate of deposit. You can even put money into each one of these to diversify your retirement portfolio.

Start your emergency savings account

Emergency savings is a must-have. Most people save for specific events, items or life-events (like weddings or retirement). However, people often forget that they may need to save for emergencies. Whether it be car trouble that needs to be repaired on the fly or a leak in the plumbing at your house, you should have a reserve fund available. Many bank accounts offer separate savings accounts (one for emergencies and one for regular savings). Have a reserve for things you don’t plan on happening is always a great way to save money.

Using apps, different types of savings accounts and keeping track of your spending are all amazing ways to save your money and cut down on spending. Whether you’re saving for retirement, expected or unexpected expenses, saving should always be on your mind, and there are ways you can be making it easier for yourself.