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 This week’s column is provided by American Express Financial Advisors How to jump start your post-college finances If you’re a freshly-minted Year 2000 graduate starting out in the world of work, you may already be dreaming of blowing your first few paychecks on some of life’s little luxuries. Granted, you have every right to celebrate your accomplishments. But consider this: in the long run a well-thought-out plan for spending and saving should result in an even better cause for celebration. Know where your money is going: Allocating your income to spending categories can help you avoid debt, plan for expenses and have more money to use for enjoyment. By establishing a time frame, and keeping track of all the money you spend, you can decide which expenses are unnecessary and which ones you need to plan for on a regular basis. Organize your finances: Balance your checkbook regularly and set up a simple filing system for important papers (bills, benefit statements, tax paperwork, insurance policies, etc.). It will be easier to track expenses and create a paper trail should you need it later. Set short- and long-term goals: Knowing what you want to accomplish with your money is an important first step in reaching your goals. A financial advisor can help you identify your goals, set time frames and suggest suitable investments to help you reach them. Set aside a cash reserve for emergencies: Even though you’re just getting started in your career and your income is likely to rise, it makes smart financial sense to set aside an emergency reserve fund of from three to six months’ living expenses, to be invested conservatively. Stash as much as possible in retirement plans: Starting early to save for retirement gives you several advantages. Not only will your investments compound and do more of the work for you, but any growth is tax deferred. (You should be aware that taxes are due upon withdrawal, and any withdrawals prior to age 59½ may be subject to a 10 percent IRS penalty.) By delaying taxes on earnings in 401(k)s, even modest investments can grow to respectable sums by retirement. Add the benefits of possible employer matches to your contributions – giving you instant return on your money – and a qualified plan is hard to beat. June 22, 2000
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