Just graduating or just starting? A quick list

Happy Tuesday!

I was just talking to a friend of mine who is going to be graduating and moving right into his professional role as a pharmacist.  He started picking my brain about things he should be thinking about when he graduates so that he doesn't just blow through all of his income.  From what I have heard about pharmacists they go from having the income of a part-time working student in college to making upwards of $100k their first year depending on their location.  As I was answering those questions I thought it would be a neat idea to post up some bullets just in case anyone else was in the discovering phase of their new financial planning obligations.  This too goes for anyone who might not have every thought about getting themselves organized.

1.) Setting up your companies retirement.  If your going to work in bigger firm odds are their company's HR department will be tossing lots of folders and packets your way with lots of deadlines.  For retirement it's a good idea to at least contribute enough to take advantage of any matching program your firm offers.  As far as stock purchase plans, or other stock based incentive programs if you are unsure start small, look for the minimums to participate and as you get more comfortable you can increase your contributions.  In the retirement plan you'll have lots of options and without giving any kind of specific recommendations try to diversify using large, mid, and small cap funds as well as a global that way you create some kind of diversity until you can have your in house or personal financial professional take a look.

2.) Your IRA.  If you are eligible I would recommend setting up a Roth, there aren't any deductions you can take as you contribute but it grows tax free and for the most part the withdrawals in retirement are also tax free.  Under certain situations you can access funds in it before retirement without any tax consequences as well and for more on it check out this IRS publication http://www.irs.gov/pub/irs-pdf/p590.pdf

3.) Automate your savings.  If you know you have a few different goals your saving for its ok to have a few different savings accounts.  If you want to vacation once a year, buy a home in five years, and a new car in three then have those accounts separate.  Right from your paycheck have amounts deposited that you feel will get you to those goals, just set it and forget them.  You can do the same for checking accounts and your bills. Having different accounts makes your savings easier to track and honor so that you aren't overspending.  When the time comes to buy that first home you know you'll have saved for it and can spend from it worry free.  Last note it's a good idea to have at least six months worth of expenses in an account in case of an emergency.

4.) Have fun.  After all that is said and done it's ok to go out and spend on the things that make you happy.  If you aren't enjoying what you worked so hard to achieve in school or working up the corporate ladder then you will drive yourself nuts thinking about all this stuff.  That's the great thing about automation, at the end of it you know exactly what your working with and you'll still cover everything that you have to.

4 1/2.) Credit.  Don't be afraid of it. Get a few credit cards and use them.  I know, I know you're thinking what kind of planner tells his clients to go out and wrack up crippling credit card debt.  That's not what I'm saying at all.  Throughout life so much is based on that little credit score number so like working out to get a better body we need to work your credit to get a healthier score.  Go out and pick up a few big ticket items and then break out the payments over the year.  Don't rush to pay it off.  The idea here is that you are demonstrating to credit companies that you are a positive credit risk and that in the future it will be easier for them to extend your credit lines or offer you great mortgage rates.  Before you get carried away though you might want to take a look at Credit Card Nation: The Consequences of America's Addiction to Credit.  It will  scare you straight.

I know I said bullet points but those were more like explanation points.  Please also note that things talked about here were in brevity, if you can believe that.  It was just to give an idea of some of the things you should start to think about.  If you want to know more about anyone thing feel free to shoot me an email or leave a comment. I love the feedback good or bad. And thanks to my friend for sparking that conversation!!

Cheers!

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