There's more to smart career planning than just landing the job and collecting a paycheck. Smart budgeting and staying on top of your debt ratio will keep your finances balanced and on track while you're busy scaling the ladder. Your career is a marathon, not a sprint, so think of financial planning as a training regimen—and be vigilant.
Emergency Funds
3 to 6 months of living expenses should be set aside in savings.
Save at least 10% of monthly income (15% ideal)
For those that can't do 10%, start small (5%) and build up to 10% with 1% increments.
Set specific goals to save X% by a certain date, and then set a new target after goal is reached.
Debt Ratios
Consumer debt payments should be 20% or less monthly net income.
Monthly housing cost should be no more than 28% of monthly gross income.
Total monthly payments on all debts should not exceeded 36% of monthly gross income.
Student debt repayment should generally not exceed 15% of monthly gross income.
Independent financial survival after college is a harsher reality compared to those who graduated during the 60s, 70s, 80s and even 90s. It's ok to get temporary help.
Parents and kids should keep lines of communication open and set realistic expectations with each other.
A plan to gradually wean down (and eventually be off) of receiving financial help to be outlined.
Divide up your savings into categories specific to additional goals like saving for a down payment on a house, buying a car, or other large purchases.
Make the transition from leasing property to buying property.
Use financial rules of thumb to determine when timing is right and the purchase is economically feasible.
Consult with experts - mortgage officer, banker, financial planner, or other trusted advisor.
company Retirement Plan
Participants should strive to contribute at least up to the company match.
Taxable income is reduced with pre-tax contributions
Time value of money - compound interest works better the earlier money is saved
100% match is an immediate 100% return on your contribution
To put into perspective the power of a company match, it takes 12 years at a 6% average growth rate for an investor to realize a 100% cumulative return; with a company match, you get 100% right away!
Prioritize applying extra payments to private loans, as they generally carry higher interest rates than federal loans.
Review terms of promissory note:
Verify loan provisions like deferment, forbearance, and consequence of late and missed payments.
Review extending the repayment terms when income and expenses are tight.
Understand what happens to the loan upon death, disability, and/ or job loss.
Refinancing a loan to a lower interest rate is usually more advantageous than refinancing a federal to a private one.
Look for employee benefits that offer student loan repayment assistance as a company benefit.
Income Driven Repayment (IDR) plans are highly advisable for those with entry level incomes or high debt ratios.
IDR plans should generally be used when the debt owed is greater than the borrowers annual gross income.
10-Year repayment saves the most interest.
Often requires the highest payments
Make sure payments are affordable
Public employees are able to pursue Public Service Loan Forgiveness (PSLF).
Any remaining loan balance is forgiven after 120 qualified, on-time, income-driven payments.
Review refinancing as an option if there are no intentions of working in the public sector.
Proceed with caution - saves interest, but often less flexible terms provided by the lender
Often require a co-signer to qualify
A strong credit score is typically necessary to reduce the interest rate and improve overall terms
