By Jason Silverberg, CLU

As we step closer toward the summer, many graduates will begin their journey from academia, into the “real world.” Some will become boomerang kids, coming back home to facilitate the transition, while others will be out on their own even before their tassels are turned. Whichever group you identify with, here are few bits of financial wisdom as you begin to create the habits that will shape your financial lives forever.

1. Create a Financial Snapshot

Before you can effectively improve your financial situation, you must take a snapshot of where you currently stand. First, make a list of all of your financial assets, all of your investment accounts, checking, savings, bonds, stocks, etc. Then, make a list of all of your liabilities, such as student loans, credit card debt, and car loans. Take your total assets and subtract your total liabilities, this is your net worth and is one indicator of your personal financial strength.

2. Analyze your Debt and Credit

Coming out of college, most young adults have a tremendous amount of debt weighing on them. To start your financial lives out on the right foot, it’s a great idea to get a handle on the specifics like the terms of your loans, how long do you have to pay, and how much each month. It also may make sense to look at some loan consolidation programs. Most of these organizations folded during the “credit crunch,” but there are still a few viable sources out there.

Along with student loans, credit cards can also be a sore point for many graduates. Either you have never opened a credit card or you took the plunge and financed your Spring Break vacation on it. It’s okay to open a credit card, since it helps you build up good credit for yourself, but you have to be disciplined enough to pay it back. If you don’t already have a credit card, make sure you apply for one because no credit can be as detrimental as bad credit. It is also beneficial to view your credit report to ensure that everything is correct and to allow you to see whether you fall within the bad, good, or great credit ratings. There are some places on the internet that will allow you to check all three credit agencies for free once per year.

3. Create a Budget

It’s a good idea to take a look at your current income and expenses. Create a list of these expenses. Take inventory of what you spend your money on for a couple months. Can you shave off a couple dollars here or there? This will help bolster what’s left over each month for savings.

4. Save, Save, Save!

As the saying goes, you must “pay yourself first.” How many times have you had the greatest intentions to actually put some money aside for a specific reason, but at the end of the month, there’s nothing left to save? Many people do just this. Instead, treat your savings as if it was a bill due at the end of the month. This way you are making sure that you’re always putting money away into savings. As long as you pay yourself first, then you don’t have to feel guilty spending down what’s left.

One easy way to do this is to directly deposit your paycheck into two different accounts, one for savings and the other for paying bills. If your company doesn’t offer this option, just add an automatic debit onto your checking account and set it for the day your paycheck hits your account.

It’s also very important to have clearly identified your savings goals. This will make it much less tempting each time you have the urge to tap that account for “fun” money. You’ll then realize that if you did that, it scoots you further away from that end goal.

5. Learn About Insurance

It is vitally important to understand those pesky insurance policies that you have floating around. Most people have the usual insurances, health, auto, renters/home owners, life, and disability. Let’s take a quick look at some things to watch out for.

·        Health Insurance

Most employers pay a portion, if not all of these premiums. Take a look at the options they give you and choose one that suits your needs. Do you go to the doctors’ more often than most? You may want to elect more coverage than someone who rarely gets sick. For those who may not use the coverage often, look for high deductible plans which are usually offered in contrast to the big “Cadillac” plans.

·        Life Insurance

Many recent graduates may not feel that this type of coverage is needed, especially since you may not have any dependents. Keep in mind that life insurance isn’t just for those who are married and have families. If you own any property or business or have any debts, then coverage may be needed. Also, if you are thinking about popping the question or purchasing that condo, then you may want to look into the different types of plans. Since you are young, and most likely healthy, you can lock in your rates. Life insurance products contain fees, such as mortality and expense charges, and may contain restrictions, such as surrender charges. Speak to an insurance expert about designing the right strategy to fit your needs.

·        Auto Insurance

Auto insurance is a must have! If you ever were in that major car accident, you want to make sure that your plan covers the right items. Take a look at your deductible and see what you can afford paying out of pocket in the worst case scenario. Many times, if you purchase this coverage from the same carrier as your Renters/Home Owners insurance, you can qualify for discounts.

·        Renters/Home Owners

This coverage is key. You want to make sure that if you were ever robbed or if your property was damaged, then you are covered. Keep in mind this coverage also takes care of property stolen from your car. And if you are purchasing home owners insurance, make sure you only cover the replacement value of your home and not the land too!

·        Disability Insurance

According to the nonprofit LIFE Foundation, nearly one out of every three workers will suffer a disability lasting three months or longer at some point in their career. You’re going to insure your car, your house, your health, even your life, but what about your income earning potential? Many employers have some sort of coverage, generally up to 60% of your income, but these plans may be deficient, leaving the burden on you to supplement.

As you create financial habits that fit your personality, don’t forget that you won’t achieve perfection overnight. Learning these strategies takes time and may be hard at first. If you have the right attitude and thirst for growth, these practices will become second nature and you will be on your way to financial success.

For more information, please contact Jason Silverberg directly at Jason@finadvinc.com.

Jason is a Registered Representative and Investment Advisor Representative of Securian Financial Services, Inc., Securities Dealer, Member FINRA/SIPC.