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.

How One Family Leveraged Their Student’s Unique Talent To Pay Less For College

Photo by Cole Keister on Unsplash

Every year I do college planning workshops for parents of college bound high school students. These workshops are held at local high schools and parents often contact me afterwards for an overview of their situation. Often, I can help them make more well-informed decisions about how to pay for college and educate them how their college goals affect retirement.

One of my strongest recommendations is to be careful about the school your student chooses to attend. How much you pay for college ultimately comes down to the school your student chooses to attend.

A while back I met with Jennifer and her husband, Michael, to discuss their situation. Earlier this fall Jen sent me the email below. Jen and Mike’s son is exceptional. Their story isn’t necessarily a reflection of what you might experience when shopping for colleges. However, it’s a great example of how one family was able to leverage their student’s unique talents to their advantage.

After the email, I share some of the key takeaways below.

Names and other identifying information have been changed, and I edited the email for length.

Jen writes…

March Madness: It’s What Happens When You Find Out How Much College Tuition Really Costs

3 suggestions for parents facing crazy expensive tuition bills

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It’s that time of year…. March Madness! Time to get your game on sports fans!

At least, that’s what I have heard.

Truth is, I know next to nothing about men’s college basketball. In fact, I probably couldn’t even name four of the 68 men’s college basketball teams participating in the tournament, much less try to predict which teams will make the Final Four.

Apparently, however, it’s a thing.

According to the American Gaming Association, over 40 million Americans will test their sanity as they fill out their brackets and place their bets as to who will win the coveted NCAA men’s basketball tournament.  Over $10 billion in bets will be placed on this year’s event before the month is over. Odds of completing a perfect bracket (whatever that means): 1 in 9.2 quintillion. Good luck.

Something I do know. College tuition is insanely expensive.

If you have kids going to college next fall, the real madness begins when you get your college admissions letters and schools tell you how much you will need to fork over to attend their school.

Use This Nifty Net Price Calculator To Estimate College Expenses

how to determine what your favorite college will really cost after accounting for scholarships and financial aid

 

 

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The price of a college education has never been higher. According to the College Board, the average private college now costs over $34,000 per year. And that’s just for tuition and fees. Throw in room and board, books, and other expenses for four years and the total cost could exceed $250,000 by the time your future scholar walks across the graduation stage.

To complicate things, every school is different. Prices vary. Scholarship opportunities and financial aid vary as well. As I have said before, financial aid varies from school to school, family to family, and even student to student within the same family.

Even if you don’t believe you will qualify for any financial aid, you will want to use this nifty calculator to get an estimate of what you can expect to pay at the specific schools your student is considering. 

What Are Your Chances of Winning An Athletic Scholarship?

 

Photo by chelsea ferenando on Unsplash

The MN Lynx recently won their fourth WNBA title. Way to go ladies! No doubt, most of these talented athletes played basketball in college. I am sure quite a few of them also received scholarship money, maybe even so-called “full rides”, to play their sport at the college level and help fund their education.
If you are the parent of a young student-athlete you may be wondering if your child could qualify for an athletic scholarship to help pay for college.

In the free guide, My Favorite College Planning Tools and Resources, which can be downloaded from my website, I share several of my best resources for parents who want to pay less for their kids’ college education. One of my favorites is Scholarshipstats.com