Starting a career is an exciting time, but it can also be quite daunting. The financial challenges that lie ahead can often appear overwhelming. I’d like to offer some suggestions that may help you make a successful launch.
Imagine a scenario where you’ve recently graduated, are newly married and pursuing the career that you studied so hard for in college. In addition to the responsibilities of a new job, you may also be facing the purchase of your first home or the arrival of your first child.
And, of course, you’ve got student loans hanging over your head for who knows how long. Simply put, there’s a lot going on and it’s difficult to prioritize and organize your finances.
There are no simple one-size-fits-all solutions. But there are some steps you can take to set your financial path on a positive trajectory.
First, at work, you need to get a good grasp of the benefits offered by your employer. Is health insurance one of them? If so, what options do you have? Low or high deductible? Monthly premiums? Is there a Health Savings Account?
Just sorting through the health care maze requires your full attention and your personal health situation is certainly a factor in your decisions.
Many employers also offer a retirement program. Too often, the knee jerk reaction is to not even consider contributing to a retirement plan. After all, you’re still young, right?
Wrong! You never want to turn down free money, and if your employer matches contributions and you don’t participate, that’s just what you’re doing.
For example, if your employer matches up to three percent of your salary, you should contribute at least three percent. Also, the new tax law makes it an opportunity to open a Roth 401(k) if offered. While it doesn’t provide any immediate tax savings, your distributions during retirement will be tax-free, provided you follow the rules.
While on the subject of employer benefits, see if your employer offers supplemental low-cost life insurance. This is especially important if you have significant student loan obligations or if a baby is now or will soon be part of the equation.
I believe life insurance is the most overlooked aspect of basic planning. I understand that young adults don’t want to think about dying prematurely, but it’s important to protect your loved ones in the event tragedy occurs.
In addition to getting a handle on your work benefits, you need to keep close track of any money that comes into your household. I suggest that you categorize it into three buckets. Bucket one is debt, which includes student loans and credit card debt.
I call the next bucket dreams. Things like cars, home and perhaps even a college savings program for the baby. But first and foremost, debt obligations need to be honored. This means paying off your student loan and credit cards on time. If possible, pay off your credit card in full every month.
Bucket three is simply paying yourself first. After your paycheck is deposited, make certain to put a few dollars in the bank before all the money evaporates. Financial success mandates that you pay close attention to details, manage your debt and save on a regular and consistent basis. I’m confident you can do it!
Fax your questions to Ken Morris at 248-952-1848 or e-mail to ken.morris@investfinancial.com. Ken is a registered representative of INVEST Financial, member FINRA, SIPC and is Vice-President of the Society for Lifetime Planning in Troy. All opinions expressed are those of Ken Morris. INVEST and Society for Lifetime Planning are independent companies
