Congratulations on your graduation! So what are you going to do now?

Does this sound familiar? Most likely you received a great deal of advice and questions about your future plans during graduation celebrations. Before tackling the next part of your life, I suggest taking a few minutes to do some life planning, specifically financial planning. Life planning should cover what you would like to do and accomplish, your career desires, spiritual goals and how you will support your dreams financially. Use your plan to help guide your daily choices.

Many young adults get bogged down trying to start their financial lives believing they can pick up where their parents left off. They can get in over their heads in debt trying to live a lifestyle that doesn't match their reality. The following are my thoughts to help you fulfill your potential and make your life personally rewarding and financially secure.

First, continue to invest in yourself. You have finished one step of your education but, you will need to keep learning for the rest of your life. Continue the pursuit of knowledge. This helps to stay current in your career field and develop other interests that will benefit you.
Live within your means. As Charles Dickens said in ‘David Copperfield', "Annual income twenty pounds, annual expenditure nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery". If you spend less than you make, you will invariably have more; learn to save first and spend what's left. This can be accomplished by following the old adage of "paying yourself first". Set your goals, know what you can afford to spend and stay within your guidelines.

Learn the difference between good debt and bad debt. Good debt comes from purchases that increase your growth assets or earning power. Good debt could be an educational loan, a mortgage on an investment property or a loan to improve your home. Bad debt comes from buying things to pursue a lifestyle you cannot afford. Credit cards are a classic example of how you can get caught in a downward spiral. Every dollar that you carry on a credit cart must be repaid many times over. When you charge a $100 dinner, and make only the minimum payment each month, it will take you 34 months to pay off one meal and you will pay over $26 interest. When you consider that the average college graduate is carrying over $7,000 on plastic, they are selling a lot of their future to the credit card companies. Did you know that bad credit hits your pocketbook in many other ways? It can impact your chance to get a job, obtain insurance and affects the rates you pay for many other services.

Save for your future. Every person needs to start with an "emergency fund" which contains enough cash to cover your fixed expenses for 3-6 months. This is your buffer between your credit card and life's bumps. Save a fixed amount each pay period to build your financial security. If you don't have a rich uncle that will help, Uncle Sam will lend a helping hand. The best opportunity is your 401k or other company sponsored plan, especially if your employer matches a portion of your savings. Your contribution is tax deferred and is like an interest free loan from the IRS. When you put a dollar into your plan you don't have to pay taxes on that dollar right
now therefore, it only costs you about 75 cents. If your employer matches your dollar, you will have two dollars invested at a cost of only 75 cents. That's a return of over 100% on your contribution!

Finally, do it now! There is no better time to start than when you are just starting your career, you have a minimum of 40-50 years left in your working life to build your financial security. If you start today, and save $3,000 a year in a tax deferred plan, in 40 years at 8% you will have $777,000. If you wait for 10 years you will only have $340,000. If you start at age 40, you would need to save $17,000 per year to have $777,000. Time can be your best ally.

As you graduate, enjoy your well earned success. Take some time to plan your financial future and you will increase your chances of having a more rewarding and satisfying life. If you cannot do it yourself, ask for help from your family or professionals, but do it. Congratulations and best wishes as you move into a new part of life!