Now that you’re out of college, the first thing on your mind is probably your long and fulfilling career, followed by a lavish retirement lifestyle. No? You’re just looking forward to Friday and Happy Hour? While you can’t predict your financial future, looking ahead today will give you almost everything you want for tomorrow. This is one more homework assignment, and it’s time to stop procrastinating.
Start simple. Big financial changes often come from small steps. Set aside a small amount from each paycheck that you won’t spend. Keep your savings separate from your cash and out of reach so you aren’t tempted to spend the money you’ve already put aside. There are a number of ways to automate saving, which will help you stay disciplined and avoid spending your funds for the future. And yes, BankSimple offers an easy way to save without opening a separate account.
Entry level salaries aren’t usually generous, but negotiating a small increase can add up over the course of your career. In an interview with NPR, Carnegie Mellon economist Linda Babcock explains, “I tell my graduate students that by not negotiating their salary at the beginning of their career, they’re leaving anywhere between $1 million and $1.5 million on the table in lost earnings over their lifetime.” This holds particularly true for women, who are less likely to negotiate a salary on their own terms.
Once you’re earning a salary, it’s important to think about life after work. Be sure to maximize your 401(k)—your contributions are deducted from your paycheck before taxes, and your employer may match a percentage of your contributions. If you don’t have a 401(k) just yet, investigate other tax-advantaged savings options such as a Roth or Traditional IRA. To determine how much you should set aside in investment accounts, calculate your estimated retirement needs and actively manage your funds.
Understanding your finances is arguably the best choice you can make for your current and future self. Take the initiative to learn how interest rates are calculated on savings accounts or credit cards, how mortgages work, or simply how banks make money. Knowing how to approach these topics now will prepare you to make good financial decisions throughout life, from avoiding debt to maximizing your savings. Over the next several weeks, we’ll be focusing on many of these topics, so keep an eye on the BankSimple blog for more helpful tips and information.
The adventures you want to have in your later years might seem far off, but your long-term future is closer than you think. If you put off saving, you might not even be able to afford the plane tickets. Your education was expensive, but the costs of college pale in comparison to the costs of retirement.
Kristi Berry is an intern at BankSimple. She is a student studying at NYU.
The illustration by Sally Madden for Simple Finance Technology Corp. is available through Creative Commons license (by-nc-nd 3.0).
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