3 Steps to Financial Success for Recent College Grads

A simple strategy to create lasting financial independence

Photo by Jonathan Daniels on Unsplash

With the national unemployment rate dropping below 4% and many state and local rates falling even further than that, the employment outlook for college grads is the best it’s been in a generation.

According to the National Association of Colleges and Employers, engineering and computer science grads command the highest salaries with an average starting salary of over $66,000. However, even college graduates with liberal arts degrees like communications and social sciences should expect average salaries of more than $50,000.

On the flip side, the average college grad carries almost $40,000 in student loan debt with many graduate and professional students exceeding that number by $100k or more.

Nevertheless, a strong economy, high employment rates and competitive starting salaries will help many young college grads to take a major leap forward in their financial life.

25 years of observing high net worth clients has lead me to believe that, for many recent grads, there are 3 key steps to financial success.

Step 1: Look for a job with great company match. Despite what you may read and hear from others, a company retirement plan combined with an employer matching contribution will likely be one of the best investment opportunities that will ever come your way.

A successful, growing company that offers a 401(k) plus an employer match on your contribution can be the difference between achieving financial independence someday and struggling financially for the rest of your life.

Even if your budget is tight, find a way to contribute at least enough to your company plan to get the full benefit of your employer match. If their contribution is capped out at 4% of your salary, contribute at least 4% to your plan. If they match more, contribute more.

Do this regardless of the economic or market conditions. Do this no matter how tight your budget is. Do this even if you have a mountain of student loan and other debt. An employer-sponsored retirement plan may not guarantee your future financial success, but your odds of success without one are small.

Step 2: Commit to always saving at least 10% of your income – starting now. Consistently saving a percentage of your income over a long-period of time is one of the keys to accumulating wealth. Ideally, you should try to save 15% to 20% of your gross income before taxes or other deductions.

In the book, The Millionaire Next Door, Authors Thomas Stanley and William Danko researched families that had a net worth of more than $1 million. What they found was that most families with a net worth greater than $1 million had consistently saved between 15% and 20% of their income for their entire careers.

In my experience, nearly all my clients who have $1 million or more investment assets committed to a long-term savings program early in their careers and they stayed with it through thick and thin.

One of the easiest ways to do save money is through payroll deduction into your retirement plan at work. Even if your employer doesn’t offer a matching contribution, find a way to add 10% or more to your workplace retirement plan.

If your employer doesn’t offer a retirement plan, start a Roth IRA. Oh, and find another employer.

Step 3: Become debt-free as soon as possible. It’s OK and perhaps necessary to have some debt from time to time. Most students borrow money to pay for college. Some student loan debt isn’t a big deal, if you pay it off quickly.

The faster you can pay off debt the less money you will pay in interest and the more you will be able to save and invest for yourself.

If you have student loan debt, create an aggressive strategy to pay off your loans within 10 years or less; sooner if possible. That may mean making extra payments or participating in a student loan forgiveness program.

Joy Sorenson Navarre, founder of Navigatestudentloans.com can help you determine if such programs are right for you. Although her niche focuses on physicians, her firm can advise anyone with high student loan balances looking to lower their student loan payments or have their loans forgiven entirely.

You can schedule a call to get more information by clicking here.

You’ve been living the life of a poor college student for the past four years. Now suddenly, you’ve got a world of opportunity before you. Make the most of it by getting a job with a good company match, saving up to 20% of your income, and paying off your student loans as soon as possible.

Follow these three simple steps and someday you may be the millionaire next door.

All Hands on Hope

Katey McCabe, and her son, Fritz (age 6), volunteering at the 2017 packing event for Feed My Starving Children.

Earlier this month I had the chance to participate in a MobilePack™ event at Incarnation Lutheran Church in Shoreview, MN. It’s become an annual tradition for me and my family.

Since I also make a monthly financial contribution to Feed My Starving Children on behalf of my clients, it’s also a great opportunity to see my investment at work, actively participate in this event and help assemble the packages of soy, rice, vitamins and veggies that will be distributed to children around the world.

The theme for this year’s event was “All Hands On Hope”. To paraphrase Pastor Gary Medin, Senior Pastor at Incarnation, if you contributed financially to this event or to the church’s capital campaign or volunteered to help assemble meals, you have a hand in making this possible.

To that I would add, if you are a client of mine, you too have had a hand in supporting the life giving work of Feed My Starving Children. Thank you for your continued support and for your part in making this event possible.

Below is a “repost” of an article I posted last year describing this event. This post has been updated with current stats and facts. 

Yield vs. Total Return. What’s The Difference?

Photo by Mathieu Turle on Unsplash

Retired clients often wonder how they will generate income in retirement. Beyond Social Security, pension payments, and other forms of guaranteed income how does their investment portfolio actually produce the money they will need to keep up with inflation and pay the bills?

Two ways in which your investments can support you in retirement are “yield” and “total return”. In this post I will share how they are different and what role they play in your long-term retirement income plan.

Confused About Those Letters Behind Your Advisor’s Name?

Photo by Amador Loureiro on Unsplash

CFP, CPA, CLU? What do the letters behind your financial advisor’s name mean and which type of advisor is right for you?

The Financial Industry Regulatory Authority (aka FINRA) lists over 183 professional designations on their website. Knowing what each one is can help you choose a financial advisor that may have specialized training and expertise to help meet your needs.

The short video below explains what the most common designations mean and the type of financial professional most likely to use each one.

 

 

FINRA does not endorse any professional designation or credential. In fact, many financial designations are total #&@^%$!, and are often banned by reputable broker-dealers and others in the industry.

Of course, even the most highly regarded credentials don’t guarantee success. As you would with any professional, do your homework, ask questions and do a quick background check before sharing your data or making any serious commitments.