Although college graduates leave their institutions of learning with a diploma in hand, many are often lacking in personal finance know-how.
Even worse, college students often don’t know what they’re lacking in knowledge when it comes to money.
In 2015, 57 percent of college students rated their financial skills as either good or excellent, according to a survey from the American Institute of CPAs.
Yet, only 39 percent of those college students surveyed had a budget. And, almost half said their bank account balance had dipped below $100.
Post-graduation can be a crucial time for setting up smart money habits that pay off over a lifetime. And, a financial planner can offer invaluable advice during this unique transition period when it comes to making financial decisions.
How a financial planner can help a college graduate
A financial planner’s role is to help guide their client towards their best possible financial health.
If you’re a college grad, a financial planner can help you work through many financial firsts you may be facing. These can range from managing a higher income to tackling student debts. As well as planning and saving for the future.
We talked with some financial planners to see how they help college graduates get a head start on their finances. Here’s what they had to say.
Get on the right path from the start
The months and even years right after college are a critical time in your financial life.
That’s because “bad money habits are not yet established,” says Brett Walters, a certified financial planner and founder of Trident Financial Planning in Colorado.
Making mistakes and figuring out your finances through trial and error can be messy and painful. But a financial planner can help you get it right from the start.
“Making a small positive impact can yield tremendous results given the long time horizon,” Walters adds.
“Most financial decisions that will have a lasting impact 30-40 years down the road occur when you’re in your 20s [like] buying a home, getting married, starting a business, investing for retirement,” says Stephen Alred Jr., a wealth advisor and founder of Ignite Financial in Atlanta.
That’s where a financial planner comes in.
“It is important to have a financial accountability partner to help steer you away from bad decisions and towards ones that align with your life’s goals,” Alred says.
Make a plan to pay off student debt
Among college graduates seeking the help of a financial planner, one of the most common goals is to figure out how to effectively tackle student loans.
“Millennials are saddled with more education debt than any generation before,” says Mel O, a Las Vegas CFP with Hot Moon Financial. “It is important to get together a strategy of how to start tackling that debt.”
With today’s student debts outpacing graduates’ earnings, many will find their student loans unaffordable. Which is why knowing your financial options is so important.
“Student loans can be incredibly complex,” points out Matt Hylland, a financial planner with Hylland Capital Management. “Should you refinance? Are there forgiveness options or special payment plans available? Is your loan forgiveness taxable?”
A financial planner can help you find the answers and figure out the most advantageous student loan repayment plan for you.
Create a post-college budget
Hopefully, graduates will have a higher income to budget with after college However, they will also face new costs, from paying for their own housing to repaying student debts.
Yet, many college students don’t budget and regularly have extremely low bank account balances. That’s not a recipe for sound financial management post-college.
Additionally, with a higher income college graduates may have to battle the impulse to spend.
“With the new income, there is a temptation to go out and spend money on cars, apartments, cell phone plans, etc.,” says Joseph Orsolini, a CFP with College Aid Planners.
For instance, Orsolini points out that many graduates will get all of the above, which will add to their fixed monthly expenses. Yet, they don’t realize that their loan payments will start six months are they graduate.
“It is difficult to add in a student loan payment when most of your paycheck is covering fixed expenses,” Orsolini explains.
Getting a financial planner’s help to create a budget can help you get a spending plan that’s both realistic for today’s needs as well as helps you plan and save for tomorrow.
Prioritize financial goals
Part of creating a smart budget is knowing what you’re working toward. Deciding on your most important financial goals can help you more efficiently prioritize your dollars to achieve them.
Walters says the top questions he gets from recent college graduates are how to decide whether to put retirement, student debts, saving for a home, or other financial goals first.
“Not everyone’s answer is the same,” Walters points out. “Each individual’s situation is unique and many factors will influence what is the best for them. “
“This is one of the best reasons to meet with a certified financial planner as early as possible; they can help provide peace of mind by providing you with a sense of direction of what is best based on your individual circumstances,” Walters adds.
Start saving for retirement and investing
Another common task financial planners will help new graduates with is saving for retirement.
An early start on retirement savings can have tremendous payoffs later. And, a financial planner can help ensure your investments are optimized for the greatest returns.
If you’re working your first job and dealing with retirement savings accounts for the first time, you’ll probably go with the default 401(k) plan and contribution options.
However, going with default 401(k) allocation may not be the best option for you, Hylland says.
“For a recent college grad who was never taught the ins and outs of investing in 401(k)s or asset allocation, this is not a decision to make on a whim,” Hylland explains.
A financial planner, however, knows all about retirements savings accounts and investment strategies. They can help you choose investments that balance your levels of risk and return.
Choosing a financial planner for the first time
The benefits of getting a financial planner as a recent college graduate can be well worth the investment.
But, make sure you do some research to find a qualified financial planner with affordable, transparent fees.
“I agree wholeheartedly that college grads desperately need financial advice,” says Robert Wilson, a financial advisor with Wilson Insight. “They just need to make sure that they get it from the right source.”
A fee-only planner is usually the place to start. These financial planners charge a flat rate and won’t have a payment structure that incentivizes them to give you anything but advice.
Also, consider avoiding financial planners that won’t meet your financial needs.
“Most likely, [recent college graduates] do not need investment advice, which is what most financial ‘advisors’ offer,” Wilson points out.
“[Instead] they need to speak with an advisor that will help them create a system that gets their finances in order,” Wilson says. “Especially since many of them have no experience managing money and were definitely not taught how to do so in school.”
“Work with a financial planner who is familiar with the unique challenges of an emerging professional and can provide the unique resources they need in order to properly help,” suggests Adam Vega, a CFP with United Capital Financial Advisers.
“Working with a financial planner early enough can help relieve some of the anxiety and stress that these issues cause,” says Vega.
Interested in refinancing student loans?Here are the top 6 lenders of 2018!
|Lender||Variable APR||Eligible Degrees|
|Check out the testimonials and our in-depth reviews!
1 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 7.89% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 6.97% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of Month/Day/Year, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 08/21/18. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at email@example.com, or call 888-601-2801 for more information on ourstudent loan refinance product.
© 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
APR stands for “Annual Percentage Rate.” Rates listed include a 0.25% EFT discount, for automatic payments made from a checking or savings account. Interest rates as of 11/8/2018. Rates subject to change.
Variable rate options consist of a range from 3.27% per year to 6.09% per year for a 5-year term, 4.64% per year to 6.14% per year for a 7-year term, 4.69% per year to 6.19% per year for a 10-year term, 4.94% per year to 6.44% per year for a 15-year term, or 5.19% per year to 6.69% per year for a 20-year term, with no origination fees. APR is subject to increase after consummation. The variable interest rate will change on the first day of every month (“Change Date”) if the Current Index changes. The variable interest rates are based on a Current Index, which is the 1-month London Interbank Offered Rate (LIBOR) (currency in US dollars), as published on The Wall Street Journal’s website. The variable interest rates and Annual Percentage Rate (APR) will increase or decrease when the 1-month LIBOR index changes. The variable interest rates are calculated by adding a margin ranging from 0.98% to 3.80% for the 5-year term loan, 2.35% to 3.85% for the 7-year term loan, 2.40% to 3.90% for the 10-year term loan, 2.65% to 4.15% for the 15-year term loan, and 2.90% to 4.40% for the 20-year term loan, respectively, to the 1-month LIBOR index published on the 25th day of each month immediately preceding each “Change Date,” as defined above, rounded to two decimal places, with no origination fees. If the 25th day of the month is not a business day or is a US federal holiday, the reference date will be the most recent date preceding the 25th day of the month that is a business day. The monthly payment for a sample $10,000 loan at a range of 3.27% per year to 6.09% per year for a 5-year term would be from $180.89 to $193.75. The monthly payment for a sample $10,000 loan at a range of 4.64% per year to 6.14% per year for a 7-year term would be from $139.65 to $146.76. The monthly payment for a sample $10,000 loan at a range of 4.69% per year to 6.19% per year for a 10-year term would be from $104.56 to $111.98. The monthly payment for a sample $10,000 loan at a range of 4.94% per year to 6.44% per year for a 15-year term would be from $78.77 to $86.78. The monthly payment for a sample $10,000 loan at a range of 5.19% per year to 6.69% per year for a 20-year term would be from $67.05 to $75.68.
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the variable rate will decrease by 0.25%, and will increase back up to the regular variable interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
3 Important Disclosures for SoFi.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
5 Important Disclosures for CommonBond.
Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown.
All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 2.28% effective October 10, 2018.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.47% – 6.99%3||Undergrad & Graduate|
|2.57% – 6.97%1||Undergrad & Graduate|
|2.51% – 8.09%4||Undergrad & Graduate|
|3.02% – 6.44%2||Undergrad & Graduate|
|2.50% – 7.24%5||Undergrad & Graduate|
|2.79% – 8.39%6||Undergrad & Graduate|