- What financial practices do you recommend individuals start after college graduation and why?
Getting into the habit of saving a percentage of their income is obviously really important and would give them an incredible foundation for the rest of their life. The funny thing is so few young people do it but it’s not because they dislike saving. It’s because they have bought into societies story they always have to have the newest and best stuff. The biggest culprits are phones, computers, and cars. If a young person could learn that it is okay to have used tech and a used car, that they paid cash for, it would put them ahead of 90% of their peers.
- How much should a recent graduate be saving for retirement, ideally?
The short answer: As much as they possibly can. Most people right out of college actually have some of the lowest bills that they will ever have in their life. This is because most don’t have a family to feed at this point and their life is usually pretty simple. It never gets easier to save for retirement and creating the habit at a young age is incredibly valuable over their lifetime. Most people make the excuse that they will start saving when they make more but their expenses usually increase right along with their income.
- Do you have any tips/cautions for recent graduates switching from a student credit card to a rewards card, etc.?
Do your research. There are a lot of great credit cards out there but there are also a lot that are pretty bad. A great way to do research is by reading the reviews of specific cards. People usually bring up the major downsides that you should watch out for. When it comes to credit cards, the most important things is to make sure you pay off your balance at the end of every month. This will help build your credit score which will set you up for better loan terms for bigger purchases (home mortgage) down the road.
- What are your thoughts on recent graduates investing in stocks? Is it ever too early to start investing.
Investing is a great idea at any age. As long as they invest in a diversified portfolio they are usually good to go. It is important to remember that no one knows what the market is going to do in the short term (no matter what the internet says). So you need to invest and stay invested. Don’t get scared when the market drops because it will. If you stay consistent, you can build incredible wealth in the market.
- How much should a young adult be allocating towards their investments.
It will look a little different for everyone but there are general principles that can be applied. Everyone should have an emergency fund before they start investing. This is 3-6 months of living expenses. Also, you might have separate savings for large upcoming expenses such as a home or car purchase. Once the rest of your life is in order then it is time to invest. The worst case is when you are forced to sell your investments when the market is down because you didn’t have enough savings to cover short term needs.