Money Management

When you’ve graduated from college, you need to make smart financial decisions to set yourself up for a secure future. Here are four to consider. 

Graduating from college and getting a first post-grad job is a major milestone. For most people, their first job after earning a degree will pay them more money than they have ever earned before. It’s also an entry into adulthood for many people, and the first time they become fully responsible for covering all the bills.

If you want to make sure you’re setting yourself up for that secure future, here are four financial moves to make ASAP once you’ve started working full time as a new graduate.

1. Find the right checking account

One of the first things you’ll want to do is to make sure you have the right checking account now that you’re earning a steady income.

You may have had a student account in the past, but now that you have a full-time job, you should be able to qualify for more checking accounts with no monthly maintenance fees if you have the ability to get your paycheck directly deposited.

Look for an account with no fees and, if you can find it, you may even want to choose one that pays you interest.

2. Sign up for your company 401(k)

It’s never too early to start saving for retirement and the sooner you sign up, the more you can benefit from compound growth. You’re allowed to contribute up to $22,500 if you’re under the age of 50 in 2023, but while you may not be able to afford that much, it’s a good idea to start investing as much as you can.

Your company may also offer an employee match, which means your company would contribute when you do. There are different rules for matching funds, with some companies matching 50% of your contributions up to a certain percentage of your salary and others matching 100% or some other amount. This is literally free money when you are eligible for this. If you have a 100% match, for each $1,000 you contribute, your employer will give you another $1,000 (up to whatever your employer’s limit is).

Be sure to do all you can to contribute enough to earn your full matching funds so you don’t leave this cash on the table.

3. Create a budget

Since you’re going to be earning a decent income now, you’ll want to make sure you are using your money as wisely as you can. To do that, you’ll need to create a budget.

Budgeting may not sound fun, but it enables you to use your money to accomplish goals — and to be sure your spending aligns with your values. You may want to start with a detailed budget allocating every dollar to a specific category of spending or savings, but if that sounds too painful to you, you can opt for a 50-30-20 budget instead. This would involve keeping fixed costs to 50% of your income, saving 20%, and spending the remaining 30% on discretionary expenses.

4. Start saving for an emergency fund

Emergencies are a fact of life and now that you officially have an “adult” job, you’ll want to be prepared to deal with them when they happen. Try to start saving a set amount each month for emergencies, with the ultimate goal of having a savings account that has enough in it to cover three to six months of living expenses. An emergency fund can keep you from going into debt whenever you have an unplanned expense.

If you take care of these four tasks, you should be well on your way to becoming a financially successful college graduate. Get started ASAP so you can get started on the right foot.

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If you have just gotten an “adult” job, you need to take one crucial step to make sure you’re setting yourself up for the future. 

When you graduate from school, ideally you will get a job with your degree that enables you to make more money than you ever have before. You’ll be embarking on your new financial life as an official adult, and there’s one key money move you must make to set yourself up for success.

You need to make a budget.

This may not seem very desirable, since budgeting sounds like something you do to deprive yourself of fun spending. But the reality is, there are many very good reasons why making a budget should be the first thing you do — and why you should be excited to do it.

Here’s why you need to make a budget, as well as some tips on how to actually create one.

Why making a budget right away is so important

Making a budget should be the first thing you do after graduation for a few key reasons.

Budgeting allows you to spend money on things you value. A budget does not have to be a document that restricts you. Instead, you can use your budget to make sure you are spending the most on things you really value. For example, if you’ve always wanted to be able to afford to dine out a few nights a week, you can create a budget that allows you to do that while cutting back on other areas so you can afford it.Budgeting allows you to avoid debt. If you decide what you are supposed to spend on different things based on your income, you can avoid spending more than you make and getting stuck in credit card debt. Steering clear of high-interest debt gives you more money to spend, since your cash isn’t going to interest. It also gives you more financial freedom since you aren’t committing your future self to making payments for things you are buying today.Budgeting allows you to accomplish big things. If you budget to save for expenses like buying a home, retirement, or going on a big vacation, you can make sure you’re saving the amount you need to make these important goals a reality.

If you can, try to get excited about making a budget since doing so will give you the chance to establish smart money habits and patterns from the start — while also making sure you are really enjoying the money you are now working so hard to earn. A budgeting app might help with this.

How to make a budget

Hopefully, you are now convinced you should make a budget to bulk up your checking account balance and use your money for the spending you value most. But just how do you actually do it?

One option is to make a zero-based budget.

With this option, you figure out how much income you’re earning and budget for every single dollar of it so you have $0 unaccounted for in the end. You should create a line item in your budget for all different categories of spending and saving, such as saving a certain amount for retirement and a home down payment, as well as specifying you want to spend a certain amount on costs like housing, car payments, gas, groceries, and dining out.

The benefit of this approach is you get to determine exactly where each dollar goes, which can be helpful as you’re figuring out how to best use your new salary. While there are other budgeting approaches you may decide to adopt later, it’s often best to go into more detail first until you get into the swing of things with your new salary. Down the road, you could consider switching to a 50/30/20 budget that sets aside 50% for fixed spending, 20% for savings, and 30% for discretionary expenses.

If you follow this tip, your budget can help set you up for the long-term financial success you deserve as a new grad.

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Dollar Tree offers many great items that can help you get ready for summer vacation. Here are some of them to add to your must-buy list. 

If you are heading off on a great vacation this summer, a stop at Dollar Tree before you go could be a good idea. The discount retailer has affordable items that will help you get ready for your next trip without running up a big credit card bill. Each of these travel helpers costs just $1.25!

Check out these great items that will make packing and traveling easier while allowing you to keep more money in your bank account.

1. Clear plastic travel bottles

If you will be flying to your destination, Dollar Tree can help you take all of your favorite beauty products with you — without buying expensive travel-size versions of them to keep the TSA happy. For just $1.25, you can get a 3-piece set of clear plastic travel bottles perfect for things like conditioner, lotions, and body wash.

Since it’s cheap and easy to bring your own products with you using these Dollar Tree items, you can say goodbye to that weird hotel shampoo for good.

2. Travel soap cases

In keeping with the beauty theme, the Dollar Tree also offers a travel soap case. Bar soap can be less expensive than body wash and some people prefer it but traveling with it is always tricky.

You get stuck choosing between leaving half an unused bar of soap in the hotel shower or carting home a half-used, wet soap bar. With the Dollar Tree’s travel soap cases, you can more easily bring your remaining soap home without getting the rest of your luggage damp.

3. Earbuds travel case

Traveling with your earbuds allows you to drown out that crying baby on the plane or avoid getting into an awkward conversation with a seatmate on a long flight. But, you don’t want to lose or break your expensive wireless headphones.

The Dollar Tree offers a perfect earbuds case so you can take your wired earphones anywhere and not have to worry about losing them on your trip. It even comes in different patterns so you can match your luggage if you’re into that kind of accessorizing.

4. Portable sewing kit

Wardrobe mishaps seem to happen to me often while traveling, with buttons coming loose or something my kids are wearing getting torn as they are going through the airport. Fortunately, a portable travel sewing kit can come in handy and really save me in these types of situations.

If you find yourself having to make wardrobe fixes on the go, Dollar Tree’s portable sewing kit has everything you need including tiny scissors, multiple needles, and a variety of different colors of thread. You can fix any issues at your destination so you’ll still look great after traveling does a number on your outfit.

5. A mirror/hair brush compact

Falling asleep on a plane can be a great way to pass the time, but it can leave your hair a mess. If you want to make sure you’re looking your best upon arrival, a plastic mirror/hairbrush combo from the Dollar Tree is a great addition to your travel gear.

This mirror/hairbrush is compact and easy to put into a purse or even a pocket, so it can also come in handy to take with you while you’re enjoying vacation activities that might leave you looking a little windblown (like a whale-watching cruise).

These five items are inexpensive, but can really make a big difference in how prepared you are on your next trip. Check them out today before you head off on your summer adventures.

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You need a job to get a mortgage. But will a new job suffice? Read on to learn more. 

Graduating college is a huge milestone, as is starting a job. And if you’ve recently done both, you should have a lot to be proud of.

In fact, if your salary is decent enough and you have some money in your savings account (say, from a job you held down during your studies), then you may be inclined to try to buy a home shortly after college. That way, you don’t have to spend money on rent only to get no equity in return.

But will you be able to get a mortgage when you’re fresh out of college? That depends on a number of factors.

How to qualify for a mortgage

Mortgage lenders look at different factors when determining whether to approve loan candidates or not. These include your:

Credit scoreDebt-to-income ratioIncome

Let’s say you’re looking to borrow $200,000 for a home purchase. It stands to reason that your lender will need to see that your income is high enough to cover your monthly payments for that sort of loan.

Many recent college graduates don’t end up earning a lot of money right out of school. But perhaps you majored in a subject that set you up for a higher-paying job right away. If so, and your earnings are such that you can cover your mortgage with ease, then you might manage to get approved. But you may not get approved if you’re earning a lower wage.

Your mortgage lender might also want reassurance that your job is stable. If you’ve only been at it a month or two, your lender might feel that approving your loan is risky. To that end, you may need to get a letter from your employer explaining the terms of your employment. If your company confirms that you’re filling an essential role that’s unlikely to go away, that might help you get approved to borrow for a home.

But even if your salary is high enough in theory to help you qualify for a mortgage, the other factors that go into that decision might trip you up. Let’s say you took on a lot of debt in college because, well, you were in college. If your debt-to-income ratio is high because of that, you may not get approved for a mortgage.

Similarly, if you’re applying for a conventional loan, you’ll need a minimum credit score of 620 to get a mortgage. But if you’re working your first job and, as such, have never really had bills in your name up until a couple of months ago, you may not have enough of a credit history to establish a credit score, or a good one. So that, too, might be a barrier to getting mortgage approval.

It’s worth a try

If you feel like you’re in a strong position to buy a home now that you’ve graduated college and are gainfully employed, then there’s nothing wrong with applying for a mortgage and seeing what happens. But don’t be shocked if you encounter some challenges in the course of getting approved — especially if you’re only earning an entry-level wage.

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Choosing the right home for your money can help you reach your financial goals faster. Learn about some of the best places to save for three common goals. 

Paying the bills is a feat unto itself every month for a lot of people, but unfortunately, that’s not enough to provide us with the lifestyle we want. There are larger financial goals you have to save up for over time if you hope to achieve them.

In these cases, where you save your money can affect how quickly you reach your goal as much as the amount you set aside for it each month. Here are some of the best accounts you can use to save for three of the most common life goals.

1. Major purchases

Major purchases can include things like buying a new car, making a down payment on a home, or saving up for a wedding or vacation. Some of the best accounts to save for these types of purchases are the following:

High-yield savings account

A high-yield savings account keeps your money liquid and enables you to add funds as needed. These accounts are typically offered through online banks, and they rarely charge monthly maintenance fees, so your balance should only grow with time.

But your rate isn’t locked in with a savings account, so there’s no way to predict exactly how much you’ll earn in interest over time. Still, you can expect to make at least some money on your savings with no risk of losing your initial deposit (thanks to FDIC insurance), like there would be if you invested it in the stock market.

Certificate of deposit

A certificate of deposit (CD) is another type of account commonly available at banks and credit unions. It enables you to earn a guaranteed interest rate over the length of the CD term, which could be anywhere from a few months to several years, depending on what you choose. But in exchange, you agree not to touch the money during this time. Early withdrawals result in penalties.

This could be a good fit if you feel confident you won’t need the money during the CD term. CDs are especially popular when interest rates are falling because you can lock in a high rate and potentially earn more than you could with a savings account during the same time.

2. Higher education

College tuition can easily cost tens of thousands of dollars for a single year, and some people spend six figures or more to obtain their degree, depending on where they attend school. It’s possible to use savings accounts, CDs, and even taxable brokerage accounts to save for higher education costs. But one of your best options is a 529 plan.

These are special savings accounts intended for higher education costs. They enable you to invest your money so it grows more quickly over time, and they offer special tax advantages. Parents and other family members may contribute up to $17,000 per year to one of these accounts without incurring a gift tax.

Students can use this money for K-12 expenses as well as traditional university or trade school expenses. They may also be able to use it to cover the costs of some apprenticeship programs. And thanks to a new law change going into effect in 2024, you’ll soon be able to roll over unused 529 plan funds up to a lifetime maximum of $35,000 into a Roth IRA in the beneficiary’s name.

3. Retirement

Retirement accounts are your best bet when saving for your life after the workforce. These are tax-advantaged accounts that enable you to invest your money so it can grow more quickly. Here are two of the most common options you’ll encounter.

401(k)s

Employers can offer 401(k)s to their employees to enable them to save for retirement. These accounts have high contribution limits. Adults under 50 may contribute up to $22,500 in 2023 while those 50 and older may save up to $30,000 this year. You could also be eligible for an employer match if your company offers one.

Most of the time, 401(k) funds are tax-deferred, which means you get a tax break for contributing to one, but then you owe taxes on your withdrawals later. However, Roth 401(k)s, which require you to pay taxes on your contributions upfront in exchange for tax-free withdrawals, are becoming more popular.

401(k)s typically restrict you to a handful of investment options your employer selects, and this isn’t always ideal for everyone. If all the available funds charge high fees, your 401(k) may not be the best home for your savings.

IRAs

IRAs are retirement accounts you can open with just about any broker. You may save in one as long as you’ve earned at least enough income to cover your total contributions for the year. If you’re married, you can contribute to one even if you didn’t work at all, provided your spouse earned enough to cover all contributions to your account.

IRA contribution limits are lower than 401(k) limits. You can only save up to $6,500 here in 2023 or $7,500 if you’re 50 or older. But these accounts give you a lot more flexibility to invest your money how you want. You can also choose if you want to pay taxes on your money upfront, as is the case with a Roth IRA, or when you take your money out, which is the case with traditional IRAs.

These are just a few examples of some of the accounts you can use to save for your major financial goals. It’s best to weigh all your options before you decide where you want to place your funds. And the right choice for you might be to use a combination of the accounts discussed here. Choose what you think is best for you right now, and don’t be afraid to switch things up down the road as needed.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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In your 70s? Read on to see where to put your money. 

By the time you reach your 70s, there’s a good chance you’ll either be retired or right on the cusp of ending your career. And that means you may be reliant on your retirement account in the absence of a paycheck from work.

That’s why it’s so important to invest strategically during your 70s. And here are some options you may want to look at.

1. Municipal bonds

Municipal bonds differ from corporate bonds in that they’re not issued by corporations. Rather, they’re issued by states, cities, and other localities looking to raise money to fund different public projects.

Municipal bonds commonly pay interest twice a year, and that’s an important thing in your 70s, since you might need the income to pay for living expenses. But what makes municipal bonds a good choice is that unlike corporate bonds, the interest income you collect will not be subject to federal taxes. And if you buy municipal bonds issued by your state of residence, you can generally avoid state and local taxes on that income, too.

One thing you should know is that municipal bonds might pay a little less interest than their corporate counterparts. If you buy highly rated municipal bonds with a 10-year maturity, you may be looking at an interest rate between 2% and 2.5%. Municipal bonds with a 20-year maturity might pay a little more than 3%, but you may not want to lock yourself into such a lengthy term in your 70s.

However, municipal bonds also, historically speaking, have a lower default rate than corporate bonds. And at a time in your life when you’re probably looking to minimize your risk, that’s important.

2. Dividend stocks

It’s a big myth that stocks are not an appropriate investment for retirees. Quite the contrary — you might need stocks in your brokerage account or IRA so your money continues to grow at a decent pace.

That said, during retirement, it’s a good idea to own stocks that pay you regularly in the form of quarterly dividends. That way, you don’t just have to wait for their share price to appreciate in order to access money.

Now, it’s worth noting that unlike municipal bonds, where the issuer is contractually obligated to pay interest, dividend payments are not guaranteed. It’s more than possible for a company to start off paying a dividend only to later shrink it, or stop that practice altogether. But if you choose stocks with a long history of paying dividends, you can minimize that risk.

3. CDs

CDs, or certificates of deposit, are a low-risk investment for people in their 70s because as long as you bank at an institution that’s FDIC-insured, you’re guaranteed not to lose your first $250,000 in deposits. Plus, depending on what interest rates look like, you may find that a CD pays you generously without the risk associated with owning stocks.

That said, you’ll need to keep an eye on what CDs are paying, and you’ll generally want to stick to shorter-term CDs (meaning, 12 months and under) to maintain some liquidity. It’s also a good idea to ladder your CDs so you have money freeing up at different intervals. That way, if CDs start paying less interest, you’ll have the option to invest elsewhere.

It’s important to invest your money in savvy ways during your 70s. To that end, it’s a good idea to focus on options that pay you steadily, and these three all fit that bill.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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