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Now Life Really Begins: Successful Financial Planning for Recent Grads

Graduation season is upon us, and today’s high school and college graduates are about to embark on their first forays into the “real” world. We’ve put together this guide to share with the graduates in your life to help them learn how to tackle debt, make smarter financial decisions, and learn how to save and invest for a bright financial future. If you find your saving and spending don’t align with your long-term goals, these tips can help you too!

Sparklers and Champagne Glasses

I admit, I have to go back a few years to my graduation, but I do remember how excited I was to “take on the world.”

I was lucky when I graduated from high school as my mother had taught me the basics of using a checking account, elementary budgeting, and warned me about overusing credit cards at a very early age. We didn’t have money for investing—or much savings—so I was on my own beyond those basics, in terms of building a financial future.

And while I learned all about country economics, corporate accounting, statistics, and general investing lore in college, nothing I participated in during those years gave me any sort of personal finance or investing advice.

I’m not alone. A survey by EBSCO found that more than 40% of college students are financially illiterate. It’s clear that schools are not equipping students for life after college.

And neither are parents.

A CNBC poll a couple of years ago reported that 31% of parents have never had a money conversation with their children!

And that’s exactly how bad financial planning starts.

In today’s world—according to U.S. News & World Report, students are beginning their post-education lives in debt—not just student loans (an average of $38,290), but also credit card debt, as shown below:

“While a slight majority have debt of $1,000 or less, 28.2% of survey respondents say their credit card debt reaches $2,000 or more.”

Under $1,000: 50.9%.
$1,000-$1,999: 20.8%.
$2,000-$2,999: 9.9%.
$3,000-$3,999: 6.5%.
$4,000-$4,999: 5.3%.
$5,000 or more: 6.5%.


Now, I’m not kidding myself—I don’t expect 20-somethings to pick up this magazine and begin taking the steps necessary to build a strong financial future—especially without a push. And that’s where you come in—you, the parents, grandparents, aunts, and uncles.

I don’t have any children, so I took on the role of devoted aunt to my nieces and nephews and started investing accounts for them when they were born. Through the years, I have to say that I tried to get them interested in investing. After all, their accounts consisted of what I thought would be kid-friendly investments like McDonald’s stock. They loved the annual reports as they got free sandwiches, but only one of the kids—my nephew—actually showed much interest in investing. And then when college began, I cashed the accounts out and gave them some additional advice on how to spend the accumulated money.

It was clear to me that financial education is not a once-in-a-while nudge; instead, making sure your young relatives have a real chance of building wealth requires a lifelong commitment. And the time to start is now.

That’s why I put this “Student’s Guide to Finances” together.

Don’t panic; I do not expect you to read, learn, and impart this information to your young relatives all at once. That’s why I’ve broken it down into sections, baby steps, actually.

Are you game? If so, I think you will find this one of the most rewarding gifts you can give your children, grandchildren, or other youngsters.

It’s Never Too Early to Begin—Tips for High School Students

Now, if you are one of those people who always knew you wanted to be a doctor, lawyer, policeman, or college professor (about 25% of graduates), you have probably already created a 10-year plan for further education or training, and you’ll have a good idea of your future earnings potential.

However, if you are like the other 75% of graduates, you may have realized in your freshman or sophomore year that you were undecided, or that you preferred to enroll in a vocational program. And after a few conversations with a guidance counselor, you may have had a vague career path in mind.

It’s a confusing time, with parents trying to direct you into a field where you can actually support yourself and you trying to find something you would like to do for the next 40 or so years.

But it really doesn’t have to be that stressful. In my November 2023 issue of this magazine, my feature article, “A Blueprint for Life: How to Do (and Invest in) What You Love,” you will find a lot of tips to help you create this blueprint, including:

  • Finding your passion
  • Learning the salary you can expect for different degrees/professions
  • The highest-rated schools for different degrees
  • Whether vocational training may be ideal for you.

When I was in high school, the one thing I knew I wanted was to go to college. But my lower-income family didn’t have the resources to send me. I haunted the guidance counselor’s office to find out if I could find financial help (this was before the internet, so research was not easy), and although I was in the National Honor Society and the top 5% of my class, I got zero assistance from my school.

Fortunately, I was able to work my way through college—with a little help from the company that I worked for—but I knew there had to be resources I hadn’t known about that I could tap. I just didn’t know how to find them.

But with the internet today, those resources are almost infinite. There are thousands of college scholarships, and here’s a site that recently rated the 175 best.

Also, you may not realize it, but 32 states currently offer some sort of educational assistance.

Lastly, don’t overlook employers that have educational assistance available for you. According to a CNBC poll, 48% of corporations offer help for undergraduate or graduate degrees. Plus, your parents’ employers or organizations to which they belong, may also offer scholarships or grants. For example, my Realtor association offers four scholarships annually to children or grandchildren of local Realtors. And almost every Kiwanis, Rotary, and other service club does the same.

Of course, there are also student loans, and this site rates the top ten loans.

But if you can find a way to avoid student loans, I would heartily recommend that you do so. Despite the President’s efforts to forgive a lot of student debt, don’t expect that generosity to last forever, and also don’t believe that everyone who has a student loan will be eligible for forgiveness.

But if you have to borrow money for school, here are some dos and don’ts:

1. Do not borrow more than you need, or you will end up wasting it and having that debt hanging over your head for years to come. A friend’s son did this and spent six years in school having great fun going to baseball games and concerts, but had to face an enormous debt burden when he graduated, for which—at age 40—he still has not recovered.

2. Be realistic about your potential salary. Go back and read my November 2023 article, then carefully research “the going rate” for the jobs for which you are applying. It would make no sense to get a student loan to support a degree in a field in which the potential income is so small that it will take you 20-30 years to repay that student loan.

3. Keep careful records of how much you are borrowing, the interest rates, and the terms of repayment. If you have to begin repaying the loan prior to securing your job, you are going to be in a world of hurt.

4. Make your payments on time and pay more than the minimum amount. The interest keeps accruing, and that is money wasted.

So, why not begin planning your financial future to find your passion and research the kinds of jobs you might be interested in and the schools that specialize in those fields that will maximize your lifetime earnings? And don’t forget to take advantage of any financial help you can get to fund your education.

For College and Vocational Graduates: A Step-by-Step Guide to Building Solid Finances

As a new graduate, you have probably already secured your first professional job. So, you know how much money you’ll be earning, and after your first paycheck—and Uncle Sam’s deductions—you’ll know how much of that money you get to keep!

Now you need to figure out what to do with that money. You have three choices: spend it, save it, and/or invest it.

I know it’s exciting to have your first professional paycheck, and you’ve probably come up with scores of ideas on how you want to spend it—a vehicle, vacations, concert tickets, golf outings, etc. That sounds like a lot of fun!

And you may think, “I’m young; I want to have fun; I’ll worry about saving and investing later on in life.” That’s how most graduates think.

But there’s no reason why you can’t have fun and save and invest, too. Let me show you how.

Step 1: Explore Housing Options

You may be surprised to find that 18% of people aged 23-31 own their own homes. I bought my first home at age 25. After I began my first professional job, I somehow accumulated a lot of engineer friends. Almost every one of them bought a home as soon as they got their first job. And most of them also made extra payments, so they had a mortgage-free home by the time they were in their 50s.

It’s not something that is usually a priority for a new graduate, but just think about it for a second.

Usually, new graduates opt for renting. Right now, the average apartment rent in the U.S. is $1,713 per month. If your first job pays you $75,000 per year, that’s 27% of your gross income.

The average home price in the U.S. is $358,734. If you decided to buy at that price, with 10% down (help from the parents!), you would have a mortgage of $322,860 and a monthly payment of $2,259. You’d be looking at another $500+/month outlay, but it might be worth it.

But it also depends on where you live. The median home price in Iowa is $147,800, while in the most expensive state, Hawaii, it’s $615,300.

This site will show you state-by-state, median housing prices. So, you might want to consider that when interviewing for your job!

The historical average appreciation for a home in the U.S. is 5.5% annually. So, depending on how long you plan to stay in your first home, it may make sense to buy—instead of rent—if you can, as you would own an appreciating asset.

The only other advice I can give you on finding a home is this: Think about all the amenities you may be paying for that you may not use—a gym, swimming pool, tennis courts, game room, or golf course. If you don’t have to have them, consider moving to a less expensive location.

Step 2: Begin with a Budget

Start with your net income. Next, list your monthly expenses. If you can live with your parents for a while after you graduate, those expenses will probably be low, and you will have a head start on your saving/investing plan.

But if you are like 68% of graduates, you’re on your own right after graduation.

Whichever your case may be, this is the perfect time to begin keeping a record of all your expenses for a minimum of one month. This includes your rent, utilities, car payment, student loan payment, car insurance, gasoline, groceries, dining out, and health insurance. Those are fairly easy to keep track of; but it’s the “extras” that will add up before you know it—$6 at Starbucks, $20 for a case of beer, $22.99 for Netflix, $80 for your hair cut and style, $100 for that shirt you couldn’t resist, $19.95 monthly for a movie theater membership, and the gym membership that is “only” $10-$70 a month.

You may not want to hear this, but a little bit of research and effort can allow you to have some of those fun things at a much-reduced cost! For example, I love coffee Frappuccinos, but I don’t want to pay $5-$6 the two or three times a week I allow myself to partake in them. I’ve tried a lot of the ready-made espresso mixes at the grocery store, but never found one I liked, until I stumbled upon a mix available on Amazon. I calculated what it cost me to make the drink, including milk and espresso powder, and it comes to $1.10 per serving. That savings alone (around $765) makes a nice addition to my investing account each year!

One more idea—if you are on the hunt for an apartment, why not consider one with its own workout room for residents?

And lastly, consider eating in for at least one of those times you plan on dining out each week. The cost of food has risen 25% since the pandemic and has escalated even further at restaurants—to the point that a meal at a fast food joint will cost you almost as much as sitting down at a casual restaurant.

Learning to cook will make you healthier and save money at the same time! Listen, those “convenience” foods in the boxed food and frozen food aisles are filled with unhealthy additives. And when you try your hand at cooking, you’ll find that making the same thing from scratch may take you 10-30 minutes longer to make, but it will taste so much better!

Now, back to those expenses. You’ll also need to plan for unexpected expenses such as auto repairs and medical bills (more on those in a minute). Lastly, you might want to dream a little and add in something for future vacations.

The best way to get a handle on necessary expenses is to label each expense as fixed or variable. Fixed expenses are just like they sound: you have to pay them. These are bills like rent/mortgage, utilities, transportation, insurance, food, and repaying loans. Variable expenses are items that you may not need, like your daily Starbucks run, eating out three times a week, the gym membership you don’t use, or those regular shopping sprees to make you feel better. In other words, these are the expenses that you have the opportunity to reduce or eliminate completely, which can be the source of your savings/investing program.

Determine average monthly costs for each expense. Your fixed expenses should be about the same each month, but things like groceries and utilities may vary. Once you’ve recorded all your expenses for a year, it’ll be easier to get a handle on your monthly output.

Many financial advisors recommend the 50/20/30 budget rule:

· 50% for essentials: Put aside 50% of your income for essential expenses such as rent, utilities, groceries, transportation, and minimum debt payments.

· 20% for savings and debt repayment: Reserve 20% of your income for savings and debt repayment, which includes your emergency fund, retirement accounts, and paying off any outstanding debts (beyond the minimum payments).

· 30% for lifestyle choices: Allocate 30% of your income for discretionary spending, such as dining out, entertainment, travel, and other non-essential expenses.

You don’t have to make creating a budget a nightmare of spreadsheets. There are plenty of budgeting apps that you can use on your phone. Forbes just rated these apps as the best for budgeting:

  • YNAB
  • Goodbudget
  • PocketGuard

Step 3: Create an Emergency Fund reports that 70% of Americans do not have an emergency fund—that bundle of cash you can access should an unexpected expense such as a car wreck or doctor’s visit occur.

You may think your insurance will cover those expenses. Not so fast. Let me give you a couple of examples.

Last November, a truck dropped several loaded cardboard boxes in front of me on I-40. There was no way to avoid them! When I ran over them, my radiator was damaged, which meant I had to be towed—about 60 miles. My AAA membership only covered five of those miles. My towing bill was more than $300. Then, the body shop called 10 days after my accident and told me that Farm Bureau was totaling my vehicle because it would take more than a year to get the two parts they needed to repair it! While the insurance covered the first couple of weeks of a rental car, I was on my own paying for it until I could get a new car. Cha-ching!

Fortunately, my new car took just a month or so to arrive, but I was still out of pocket $1,100 for the rental.

But even much worse than that—a few years ago, I had to have my rotator cuff rebuilt. My insurance covered 80% of my surgery costs, but the other 20% came to nearly $5,000 out of my pocket. And then there were the four months of rehab, which the insurance only partially covered. I calculated that the surgery and rehab cost me about $10,000 out of pocket.

Believe me, you need an emergency fund! Historically, experts have advised that you have three to six months’ worth of living expenses in your rainy-day fund. The more the better!

Step 4: Build Your Credit Score

Your credit score is a history of your past credit and a prediction of your future credit behavior, i.e., how likely you are to pay a loan back on time. When you need to buy a car or home, rent an apartment, get a credit card, or buy insurance, your credit score will be important.

If you haven’t built up your credit, banks and lenders will not lend to you or will make you a loan at a much higher rate than you could get if you had a history of good credit use.

Just look at this example of mortgage rates by credit score from Business Insider:

FICO ScoreNational average mortgage APR
620 to 6398.314%
640 to 6597.768%
660 to 6797.338%
680 to 6997.124%
700 to 7596.947%
760 to 8506.725%

From highest to lowest credit score, the rate changes by 1.589%. Over the 30 years of a typical mortgage loan, that difference will add up to a lot of money that you could have saved. And even with a car payment—with an average term of 72 months—paying an extra 1.5% in interest over six years is simply throwing money away.

Step 5: Manage Your Credit Cards from the Very Beginning

Credit cards are a great tool—when used wisely. But people of all ages have become dependent upon them for everyday living expenses, including 59% of millennials. And more than 49% of credit card users carry balances from month to month. That’s a major expense since the average interest rate on a card today is 24.17%.

If you carry a balance of $5,000—about what the average college graduate has—and you just make small payments, let’s look at just how long it’s going to take to get out of that credit card debt.

If you pay $102 per month, it will take you more than 18 years to pay off that card, and it will cost you more than $22,000. I ask you, was that vacation you put on your card worth it? No! Instead, consider how much money that $102 a month invested in the stock market at an average annual return of 9% would add to your financial picture—more than $19,000!

Listen, it’s fine to use your credit cards for everyday expenses like gasoline, car repairs, automatic annual renewals for things like newspapers, magazines, and some business expenses—as long as you seek to pay the balance in full.

It’s better not to get in the habit of carrying balances, as that is also throwing money away. But if you have already found yourself unable to pay the balance in full each month, I’d recommend that you take another look at what you are spending on, and then delete anything you don’t absolutely need.

If you have a balance, do yourself a favor and get a reality check for how long you will be in debt.

Bottom line, not only will living on credit create stress and financial difficulties you don’t need, but it will also cause you to miss opportunities for using your money to make money, which, in turn, will give you the freedom to choose your jobs, where to live, and what kind of lifestyle you want to pursue.

Lastly, choose the right credit cards. You might as well get something out of them, whether it’s gift cards, travel rewards, or cash back.

Here are the top-rated cards for graduates, according to Forbes:

Step 6: Choose Your Bank Wisely

Some 99% of Gen-Zers use mobile banking. You all love speed and instant payment solutions like Venmo and Zelle, which are your favorites, along with digital wallets like Apple Pay, Google Pay and PayPal.

Yet, I’d recommend that you also consider beginning to build a banking relationship as soon as you start working at your first professional job.

It may not seem important now, but someday, you may need a loan—auto, home, or even funds to start your own business—and that process will be much easier if you have already established a banking relationship.

You can start by using mobile banking, Forbes recently rated the best mobile banking apps, based on ease of use and available features, as follows:

But it’s also a good idea to check with your local bank. Most of them have mobile banking available today, and that would be a two-for-one—establishing a mobile connection, as well as a banking relationship.

Step 7: Take Advantage of Your Employer’s Benefits

Free Money, Courtesy of your Employer’s 401(k) and the Effects of Compounding

Thinking about retirement at age 22 seems silly, but if you spend a minimal amount of time considering saving for retirement at this early age, you will be absolutely amazed at how much freedom your investments will offer you—freedom to travel where you want to go, to perhaps retire early, to help fund education for your future children and grandchildren, and to make sure you can live comfortably and well throughout your retirement years.

The first action to take is to find out if your employer offers a 401(k) plan. This is a retirement program where you (by payroll deduction) invest in a selection of investments offered by the plan. Most employers have a matching system, often $0.50 to $1.00 for every dollar you invest, up to 4%-6%, on average of your annual salary.

For 2024, the 401(k) contribution limit (the amount you can invest annually) is $23,000. I sure hope you can afford to do that with your first job, but if not, don’t worry, just invest what you can. You’ll be delighted to see how that investment will compound over time into a tidy nest egg.

Let’s look at a couple of examples.

Perhaps you think you can comfortably invest $100 per month in your 401(k).

Let’s estimate that your salary is $75,000 per year. You are contributing $100 per month, so that’s $1,200 per year. Let’s also assume that your employer matches $0.50 of every dollar you contribute, up to 4% of your annual salary; that’s $600 per year. That comes to a total of $1,800 per year into your retirement plan, $600 of which is free money!

Now, for this example, I made a couple more assumptions:

Current age: 22
Retirement age: 65
Annual salary growth: 5%
Expected annual rate of return: 9%

And here are the results from

Your Estimated Retirement:


Total employee contributions


Total employer contributions


And here’s a visual example of the effects of investing at different ages:

Below, Alice, Barney and Christopher experience the exact same 7% annual investment return* on their retirement funds. The only difference is when and how often they save:

  • Alice invests $5,000 per year beginning at age 18. At age 28, she stops. She has invested for 10 years and $50,000 total.
  • Barney invests the same $5,000 but begins where Alice left off. He begins investing at age 28 and continues the annual $5,000 investment until he retires at age 58. Barney has invested for 30 years and $150,000 total.
  • Christopher is our most diligent saver. He invests $5,000 per year beginning at age 18 and continues investing until retirement at age 58. He has invested for 40 years and a total of $200,000.
6-24 Compound Interest chart.png


The secret magical ingredient is the POWER OF COMPOUNDING. As Investopedia says, “Compound interest is interest that applies not only to the initial principal of an investment or a loan, but also to the accumulated interest from previous periods.” That simply means you’re earning interest on your interest, or that your principal and accrued interest are both earning interest.

Not too shabby, hmm? The key takeaway here is: Don’t ignore free money! And each time you get a raise, increase your contribution to your 401(k) plan. It will pay off!

Health and Life Insurance and HSAs

According to, some 86% of American corporations provide health insurance for their employees. You may have to wait a couple of months into your employment before it kicks in, and you will probably have to pay part of the premium, but it will be well worth it, as many group policies don’t require a health exam, and if you have preexisting medical conditions, you will want to sign up as soon as you can.

It’s important to find out if your coverage under your parents’ insurance policies will cover that waiting period. Most insurers cover the child until age 26, but there are some exceptions. It makes sense to know for sure. You may be tempted to stay on your parents’ coverage, but if you do, it may be more difficult to enroll in your company’s group coverage if you don’t do that as soon as you are eligible.

A recent study by Guardian Life found that 52% of employers offer life insurance worth one times your annual salary. Some offer more; some offer a flat amount. This doesn’t usually cost you anything, so go for it!

Your employer may also offer a Health Savings Account (HSA). They are growing in popularity, especially among large corporations, as you can see in this graph:


A Health Savings Account is a personal savings account to which you and your employer (maybe) contribute to pay certain qualified medical expenses, like deductibles, copayments, coinsurance, and more. With an HSA, you set aside money that you then withdraw tax-free.

Some qualified, out-of-pocket medical costs include:

  • Deductibles
  • Copayments
  • Coinsurance
  • Acupuncture
  • Ambulance costs
  • Doctor visits
  • Hearing aids
  • Prescription drugs
  • Psychological therapy/psychiatric care
  • Qualified long-term care services.

It’s important to note that any funds remaining in the account at year’s end do not carry over to the next year, so you need to make sure you spend them.

There are many rules regarding HSAs, and they will differ according to your employer’s plan, so please make sure you get all the details from your Human Resources department.

Step 8: As You Progress in Your Career, Add an IRA

Now, an Individual Retirement Account (IRA) may not be in your immediate future (unless you don’t have access to a 401(k) plan), but you should put it on your to-do list, once you have reached your maximum annual contributions to your 401(k) plan.

Doing so will substantially increase your future money and enhance your financial life. For 2024, you can contribute up to $7,000 annually into an IRA, which you can set up at any bank or investment firm.

There are two types:

The Traditional IRA, which is tax-deferred. That means anything you contribute is before taxes, so you pay taxes once you begin withdrawing from your account (at retirement). The thinking is that you will be in a lower tax bracket at that time, so you will pay less.

The Roth IRA, which is tax-exempt. That means your contributions are made in after-tax dollars, so when you withdraw your funds during retirement, you don’t pay any more taxes on the funds. The only caveat is that you can only contribute to a Roth IRA if you earn less than $165,000 annually.

The good news is that in your early earning years, you can most likely contribute to a Roth IRA, and then as your salary goes beyond the Roth limit, you can contribute to a Traditional IRA.

Track Spending; Invest as Much as Possible

In summary, I want to say congratulations on your huge accomplishment! And I would like to encourage you to invest as much as you can at every opportunity and to keep adding to your savings.

And as you move along in life and are in the position to maximize your 401(k) plan and your IRAs, I’ll be glad to take you to the next step—building your individual portfolio to enhance your investments.

In the meantime, I encourage you to track your money and carefully plan your spending. Have fun but buy what you need and what brings you happiness. Discard the frivolous (except occasionally!) and make your money grow for you. You’ll be glad you did!

Nancy Zambell has spent 30 years educating and helping individual investors navigate the minefields of the financial industry. She has created and/or written numerous investment publications, including UnDiscovered Stocks, UnTapped Opportunities, and Nancy Zambell’s Buried Treasures under $10. Nancy has worked with for many years as an editor and interviewer for their on-site video studios.