Move The Tassel: 4 Financial Planning Tips for New Graduates

Jason Spicer
Jason Spicer
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Green grass, oversized caps and gowns flooding campus streets and auditoriums, proud relatives, blurry photos, a rush of excitement—graduation season is upon us.

Congratulations class of 2021!

Graduation is an exciting time marking bittersweet endings and the anticipation of new beginnings. You’re entering a new phase of your life and career, and it’s in these formative moments when you can create a personal finance strategy to carry you throughout the rest of your life.

With your decorated cap and diploma in hand, you’re ready to take the world by storm! Here are some personal finance tips as you enter into this new and exciting time in your life.

Create a Cash Flow Plan Right Out The Gate

An entry-level salary coupled with the high cost of living and mounting student loans makes proper cash flow planning essential. First things first: create a budget. Budgeting might not be an exciting Friday night, but it is the first step to understanding and forming healthy financial habits.

Pull up an app like Mint, YNAB, or PocketGuard, an excel sheet, or pen and paper and get to work. Start by making a plan for your monthly expenses. How much will you spend on rent (or your old bedroom in your parent’s basement), food, utilities, entertainment, moving, etc? Where will debt repayment factor in? What portion of your income will be slated for investing?

You don't have to be restrictive, just realistic. You don’t have to completely cut eating out with friends, for example. But instead of hitting a new foodie hot-spot every night, consider having people over for a potluck and game night. That way you still maintain your social connections and avoid paying $25 for a craft cocktail. Knowing where your money goes is empowering, and is a skill you can take with you as your net worth grows.

*Bonus: Use credit cards to your advantage as you work to build credit for the future. Building credit is a great way to help you get competitive interest rates on a mortgage, car, or other personal loans. It takes time to build credit, so starting sooner will help give you an edge. Start small like paying for gas with your credit card!

On the same token, be smart with credit cards and don't let them get you into spending trouble. A good rule of thumb: pay off your bill in full every month. Making the minimum payment will lead to sky-high interest rates and end up costing you way more in the long run.

Build An Investment Plan—Starting With Retirement

When it comes to investing, time is your best friend. Our advice? Start early! Don't wait 5-10 years to build a portfolio that helps support your future goals. Down the road, you’ll never say “I started investing too early.” Investing is all about maximizing your time in the market, and waiting even just a few years could set you back in compound earnings.

Looking to double down on your investment strategy? A great place to start is with your employer-sponsored retirement plan. You can automate contributions by electing to contribute a percentage of your paycheck. Since it’s a portion of your paycheck, you’ll never get used to spending that money. This can help keep lifestyle inflation in check while also ensuring you’re actively investing month to month.

If you have a 401(k), you can save a max of $19,500 in 2021. While you may not be able to hit that max right away (kudos if you can!), it’s wise to at least contribute enough to qualify for an employer match, should your company offer one. A match is free money, don’t leave it sitting on the table!

Investing can and should go beyond your 401(k). Here are some other options to consider.

  • Roth 401(k)
    • Think about this account like a 401(k) and Roth IRA combined. You fund it with after-tax dollars, the money grows tax-free, and qualified distributions remain tax-free. Roth 401(k)s don’t carry an income limit for contributions and they have the same contribution limit as traditional 401(k)s. This is another great account to consider funding early on if your company offers it.
  • Roth IRA
    • Roth accounts are after-tax vehicles where your money grows tax-free and qualified distributions remain tax-free. It’s an excellent long-term investment channel. A Roth IRA does carry an income limit, $140,000 if filing single and $208,000 if married filing jointly, but just starting out, you likely won’t need to worry about it yet.
  • Traditional IRA
    • IRAs offer more flexibility and investment options, making them a good consideration for investors. A traditional IRA operates similarly to a traditional 401(k)—pre-tax contributions (up to certain income thresholds), tax-free gains, and taxable distributions. You can contribute up to $6,000 in 2021.
  • Brokerage account
    • Taxable investment account—think Fidelity, Betterment, etc.

Investing is so much more than opening an account and making deposits. Your investment plan should have a purpose and goals behind it—that’s why it’s great to start with retirement. Retirement is a huge long-term goal. To accumulate enough money to support your future dream retirement, you’ll likely need to save intentionally all throughout your career.

Prioritize Student Loan Debt Repayment

Out of the 1.7 trillion dollars in student loan debt, a few thousand might be on your shoulders, and you'll likely need to start paying those loans back within 6 months after graduation. Use that (rather limited) time to create a plan for your debt.

Let’s take this step by step.

  • Know how much debt you have—a total figure.
  • Determine the number of loans you have—$40,000 across 4 loans, for example.
  • Understand the type of loan—private vs federal. Each offers different repayment options.
  • Write out the interest rates for each loan—you’ll likely have a different interest rate for each loan you took out.
  • Look at the estimated monthly payments—and try to pay more!

Once you have all the facts, what comes next? You will need to make a plan for paying your loans off. While you will need to make the minimum monthly payments, try to put extra toward your loans if you can. If you have multiple loans, which should you put more toward first? Here are a few ideas.

  • Look at the interest rates.
    • If one loan has a significantly higher interest rate than the other, it could be beneficial to pay off that loan quickly to avoid high-interest payments over the course of the loan.
  • Look at loan balances.
    • You may want to pay off your smallest loan first to psychologically take a “win.” This can be a useful strategy if all of your loans have similar interest rates.

If you already have good credit, you could look into refinancing your student loans. One element of note: consolidating and refinancing federal student loans into private student loans eliminates some of your repayment options like income-related repayment plans and federal student loan forgiveness.

There are several options for students seeking federal student loan forgiveness like Public Service Loan Forgiveness, Teacher Loan Forgiveness, Perkins Loan Cancellation, and more. These programs usually involve employment in a certain profession and consecutive monthly payments for a set period. Check out the Federal Student Aid website for a more complete list of rules and regulations to qualify for these programs.

*We're monitoring the president's student debt plan. As of today, no new report has been issued.

Set Your Own Money Goals + Priorities

One of the most exciting elements of personal finance is connecting your money with your life. Set some short and long-term goals for yourself early to put your money in context and give saving, investing, and spending a purpose.

How can you get the most out of goal-setting?

  • Create both short and long-term goals.
    • Of course, save for retirement, but what other goals do you have on the horizon 1, 2, 4, or even 10 years from now? Maybe it’s a dream vacation or saving up for your first home. Both short and long-term goals have a place in your financial plan. They can add depth and help bring more intention to your money.
  • Make your goals S.M.A.R.T
    • SMART goals will help bring more intention and focus to each goal you set. Let’s break down the acronym: specific, measurable, attainable, relevant, and time-bound. This asks you to think critically about each goal you set, building a plan to see them through to the end.
  • Celebrate small and large milestones
    • Check in on your goals regularly. What progress have you made? What’s still left to go? Have any of your goals shifted along the way? Carving out time to monitor your progress keeps you invested and motivated; this is especially helpful for long-term goals.

Ask For Help

As you’ve likely learned throughout your pursuit of higher education, asking questions is a good thing! Knowing the right questions to ask can help you get ahead, so why not apply that same logic to your finances?

New graduates have incredible opportunities to form healthy financial habits and make strong decisions that put them on the path to success. Our team loves working with people to help them secure a financial future they’re excited to live.

At First Dakota Wealth & Trust, we know that finances and life go hand in hand, which is why we use a Life Planning checklist with all of our clients to make sure that their money is aligned with their vision for their ideal life.

Ready to take the next step to your financial future? Set up a call with our team today!


First Dakota Wealth & Trust is the fiduciary investment department of First Dakota National Bank with trustee powers to serve clients during their lifetime, during incapacity, and after death. We help clients develop a financial roadmap to help simplify their financial future.

Please note that neither First Dakota National Bank nor First Dakota Wealth & Trust Department, or its employees provide tax or legal advice. This is intended for informational purposes and is not intended to constitute legal or tax advice. Please consult your attorney and/or tax professional for advice related to your specific situation.