Contributor: Kristen Fricks-Roman
Company: Morgan Stanley Wealth Management
Title: Financial Advisor
‘Tis the season of college graduations, when the student chapter of life closes and the adulting one opens. With the transition comes a whole new set of questions to consider, from where to live and work to how to pay back student debt to what it takes to navigate the numerous aspects of daily life on your own.
Financial decisions are particularly impactful because they affect so many areas of life not only today, but also down the road. And it can be difficult to know where to start. Asking for help when you need it is important, as is remembering that no perfect path exists. Here are a few financial tips to think about as you embark on this new adventure of life.
Set a Budget
A budget is like other parts of life: too much or too little of a good thing creates imbalance. And balance is the key — between living for today and preparing for tomorrow and allowing for flexibility if you encounter occasional gaps in your budget. Keep in mind your overall goals, which often are financial health and independence.
When creating a budget, you’ll first need to understand what you’re working with (income as well as assets, like savings or investment accounts). Then tally any debt that you make regular payments on (credit cards, student loans, car payment, etc.). These are your liabilities. Don’t forget to include variable expenses, such as car maintenance, birthday gifts and meals out. When you subtract your fixed and variable expenses from your income, you’ll have a clearer picture of what you’re working with financially.
If you’re like the majority of college students who graduated in 2018, you probably have student loans. Sixty-nine percent of them took out student loans, and they graduated with an average debt of $29,800, including both private and federal debt. Additionally, 14 percent of their parents took out an average of $35,600 in federal loans. If you do have student loans, be sure to factor them into your monthly budget. If you don’t, be grateful for your financial freedom and get a head start on saving for the future.
Start Saving Early
Fact is, the earlier you start saving, the better off you’ll be. That’s because you’ll be taking advantage of compound interest, which increases exponentially over time.
Saving doesn’t have to be a drag. Make it fun by setting a goal for yourself. And if you treat saving as an expense, like a car or credit card payment, you won’t miss those funds. Setting up automatic deposits into a savings account makes it even easier. Start with 5 percent of your paycheck and move toward 10 percent over time. And don’t forget to be gentle with yourself. Life happens, and this is a process. Some months may be better than others, but you’re looking for a healthy balance that works for you.
Make It Last
To help make your money go further, get into the habit of paying your bills on time and in full. This helps avoid late fees and interest charges. Small amounts add up, so making your own coffee, reducing your cable bill and keeping your entertainment expenses to a minimum all contribute to your financial health. There are many ways to cut corners and still feel like you’re living life fully.
Stepping away from college life and into the world of adulting can leave you feeling like you’re at a difficult crossroad. You can ease the stress and worry about money and debt with smart planning and time-tested steps that many before you have taken toward financial independence and freedom.
Kristen Fricks-Roman is a Financial Advisor with the Wealth Management Division of Morgan Stanley in Atlanta. The information contained in this article is not a solicitation to purchase or sell investments. Any information presented is general in nature and not intended to provide individually tailored investment advice. The strategies and/or investments referenced may not be suitable for all investors as the appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives. Investing involves risks and there is always the potential of losing money when you invest. The views expressed herein are those of the author and may not necessarily reflect the views of Morgan Stanley Wealth Management, or its affiliates. Information contained herein has been obtained from sources considered to be reliable, but we do not guarantee their accuracy or completeness. Morgan Stanley and its Financial Advisors do not provide tax or legal advice. Before investing, investors should consider whether tax or other benefits are only available for investments in the investor’s home state 529 college savings plan. Investors should carefully read the Program Disclosure statement, which contains more information on investment options, risk factors, fees and expenses, and possible tax consequences before purchasing a 529 plan. You can obtain a copy of the Program Disclosure Statement from the 529 plan sponsor or your Financial Advisor. Morgan Stanley Smith Barney, LLC, member SIPC. CRC 2235406 09/18