New Graduates - Mind Your Financial Health

As is now the season of caps and gowns, here is some financial advice, gathered from over 30 years of investing and life experience, for the recent graduate.  


Your financial status is more important than your social media one!   Things like job offers, how much you pay for a car loan, home or car insurance and your mortgage rate are just some of the things determined by your credit score.   Thinking of being financially independent and being able to retire at a reasonably young age?  Better start saving now, the old adage of "pay yourself first" is very true!

1. If you are offered a 401(k) plan at work, make sure you are contributing at least as what will be matched by your employer.   Preferably you want to contribute at least 10% of your pre-tax income and try to build from there.  If this is too much of a stretch financially, then go for at least the match.  Yes, there *is* such a thing as free money 😉
2. Open up a Roth IRA and max it out - your earnings will be TAX FREE - yep - tax free for life.  That can add up to tens of thousands of dollars of tax savings on top of the earnings that your contributions will make.  If you can't hit the max, don't worry, invest what you can and watch it grow.
3. Enroll in a High Deductible Health Insurance plan and set up an Health Savings Account (HSA) account if your employer offers it.   Compare all plans offered, if you are in reasonable health, a plan with higher deductibles that you can pay with before tax income will often make a lot more sense financially.   These savings can also be invested as they accrue and can be used to pay for medical related expenses for yourself or any of your dependents (as determined by who you claim on your taxes). Finally, once you turn 65, they become a "stealth" IRA and can be used for any purpose and are taxed as ordinary income.
4. Implement the couch potato method for investing - use low-cost Exchange Traded Funds (ETF) that are based on market indices (Vanguard and Fidelity have excellent ones) and base your investments on an Asset Allocation model based on your age and risk tolerance (hint: you're young be more aggressive!)  Great article here:  https://assetbuilder.com/knowledge-center/articles/how-to-build-couch-potato-portfolios-with-exchange-traded-funds
5. You are an adult now, pay your damn bills on time!    Here's a great way to make sure you will pay your bills on time - enroll in an auto-pay plans.  This is especially important for your credit cards - like Visa or MasterCard as they make a lot of money from late fees and paying late will negatively effect your credit score.    Do this too with utilities - you may have to send in a voided check - but once it is set, you can forget about it- just make sure you have the funds in your checking account to cover this. But hey, you're a college graduate making the big buck now!
6. Check your credit score for free once a year here:  https://www.annualcreditreport.com/index.action and take steps to make sure anything that is misreported is fixed.
7. Look at any recurring fees or subscriptions that you pay regularly.  With just a little time spent you may find out that for but don't really need or use them.  This could include gym membership, magazine or on-line services.    For example, I had a membership to Automobile Association of America (AAA) as my cars are getting older, but it turns out my Fidelity Rewards card has a reduced, pay as you need it auto service that I can use for $60-$70 per incident.  These service providers are often the same that AAA uses.   I cancelled the AAA plan, saving me almost $80 / year.
8. Choose insurance plans - auto, home or apartment - with higher deductibles (like $1,000 to $10,000 that you have to pay before the policy kicks in). Compare these rates - which are usually not in favor of the company or agent selling them so tend not to be brought up as options.   These can save you a lot of money over the course of your lifetime. 
9. Make your credit card earn money for you!   Shop around and choose a card that offers you cash rewards - not points for loyalty.  Cash is King!  Fidelity offers a 2% cash back card on ALL purchases that I've used for years.  Just make sure you pay your balance in full on time (see #5)  https://www.fidelity.com/cash-management/visa-signature-card   Use it in lieu of any private, store issued cards and watch the money come in every quarter to your Fidelity Cash Management / Brokerage account.
10. Buy a used car.   A new car is one of the worst investments you can make - aside say from a time share.  The moment you drive it off the lot, you've lost about 20% of your investment.   There are a glut of mid-size sedans out there that are one to three years old - consider one of these before committing yourself to 3-5 years of high, monthly payments for a new car.