And They’re Off...Triple Crown Advice for Graduates

May 5, 2013

What an exciting time of year! Graduates are coming down the stretch headed for the real world and horse enthusiasts are hoping that Kentucky Derby winner, Orb, brings home the Triple Crown. Here’s some Triple Crown advice for new graduates:

Don’t "Whirlaway" Your Income

Now that you are receiving a full-time salary and feeling a sense of wealth, you should not whirl-away your hard-earned money. Instead, craft a realistic spending plan that can make you a winner.

Research the cost-of-living for the region where you will be working. If it is higher relative to where you grew up or attended college, focus on the higher prices for the necessities. Determine the fixed expenses, which are those items that will consume a part of the paycheck every month, such as rent, utilities, student loan payments, transportation costs, and other work related expenses.

Important! Notice that entertainment is not part of your fixed expenses. Dining out, movies, clothes, hair cuts, socializing with friends are all variable expenses. Therefore, thoughtful management of your fixed expenses, allows you to have more money to spend on your enjoyment expenses.

Be “Affirmed” in Your Savings

Saving for retirement…...I just started my career? Retirement might be a long way away, but the earlier you start to save, the more enjoyable your retirement. If you start saving $100 per month at age 25 and the average investment return is 8%, then your savings will grow to $412,900 by your age 60! Wait to start saving until you are 35 and your retirement savings is only $171,185. Waiting 10 years cost you $241,715.
Many companies offer a 401(k) where the employer will match your contribution. Be sure to contribute at least enough to earn the company match - that is free money to you. Start saving early and often and you can be like the Oracle of “Omaha.”

“Assault” Your Debt

Taking on too much debt is a great hindrance to financial security and many turn to credit cards when in financial need. Credit cards can be a terrific money management tool if used appropriately – that means paying off the outstanding balance each month. Allowing a balance to accumulate on the credit card at an interest rate of 18% to 21% can create a black hole from which it is difficult to emerge. Generally, credit card debt is created to fund a lifestyle that cannot be sustained. Instead of spending like a “Gallant Fox”, watch your spending like a “War Admiral.”

Summary

Making good choices now may keep you from having “Regret” of always struggling with finances and worrying about a secure financial future. It’s okay to take some “Genuine Risk” every now and then, but being financially literate, understanding the cost of debt, and learning to enjoy a lifestyle within your means are the way to “Winning Colors.”

As we say at the track, “Go, baby, go!”

Triple Crown Winners