Congratulations on your latest academic degree!  While you've spent many years in the classroom becoming an expert in your field, our experience has been that the academic world does a poor job equipping you to manage your finances successfully. Here are a few areas that most recent graduates will find relevant: 

Paying Off Your Student Loans

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Setting Up An Emergency Fund

As you begin your first job and have a consistent source of income, your first step should be to setup an emergency fund. An emergency fund is simply a stash of money you have set aside to pay for large expenses you aren't able to prepare for. Having to replace a transmission in your car or pay a surprise medical bill can be a stressful if you don't have sufficient cash available, exponentially so if you have to use a high interest credit card charging 15% APR to cover the bill until you come up with enough cash.   

If you're just getting started, our advice would be to open an online savings account and set a goal to save $1,000. If you're under a mountain of school loan debt, saving even a few dollars a month into your emergency fund is still recommended. Learning how to save a portion of every paycheck is a financial muscle you'll want to start exercising now. Once you've saved your first $1,000, your next goal will be to have about 3 months worth of living expenses in your emergency fund. 

Saving three months of cash in an online savings account earning 1% isn't exciting. It's psychologically challenging to have such a large stash of money that is reserved only for emergencies. However, the sooner you take the initiative to get this step done, the sooner you'll be sleeping a little easier at night. 
 

 

Understanding Compound Interest

Albert Einstein once said compound interest is the most powerful force in the universe. If you've ever rolled a snowball around a field of snow, you have experienced compound interest in nature. As the snowball rolls, it accumulates more snow at a faster and faster rate. In no time at all, moving a short amount of distance will add such a large amount of snow it becomes too heavy to move. That's because the snow you're accumulating also has the ability to accumulate more snow. Instead of a field of snow, imagine rolling a snowball down the side of a snow-covered hill. As shown below, the higher your starting point, the exponentially bigger your snowball is at the bottom. 

 
 

The idea of harnessing the power of compounding interest in respect to your money should be intriguing. Your money can take advantage of compound interest in a couple different ways, however the most simple, efficient and commonly used method is investing a portion of your savings into the stock market (i.e. your retirement plan at work). Relating to the example above, the sooner you start investing your money, the longer amount of time your snowball gets to accumulate snow rolling down the steep hill. If you're a recent graduate, your greatest financial asset is time. Learning how to harness the power of compounding interest over a 35 to 40 year investment horizon will make an exponential difference in your retirement. Here's a simple example of how it works:

Providence Joe

Invests $150 /month starting at age 23 until age 65

Average Joe

Invests $150 /month starting at age 30 until age 65

 
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Saving For A Big Upcoming Expense (House, Wedding, Etc.)

Even though you have the greatest investing asset in your favor (time), it can be challenging to save for a retirement 40 years away if there are large expenses looming in your immediate to near future like a wedding or a house down payment. 

apparent large expenses in your future, like a wedding or a house down payment.  investing money for a retirement 40 years away can often be overshadowed by large expenses that loom in the near future, like a wedding or a house down payment. 

 


Buying A (Used) Car

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Learning How To Budget

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Your Greatest Obstacle

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How We Can Help You

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