5 financial tips for new college graduates

Graduating from college? If you’re like many young adults, this is the first time you'll be managing your finances independently. There’s more to it than ensuring you have enough money in the bank to pay for your next bill.

According to financial professionals, these five strategies can help you hit the ground running during this transitional phase of life:

Live without regret

Break the cycle of spending too much and stressing afterward by creating a spending plan that prioritizes the expenditures you value most. Remember, finding a budgeting framework that builds confidence and security without feeling restrictive may require trial and error. A financial professional can help you draw up a plan and reassess it whenever there are changes to your income, fixed expenses or overarching goals.

Make sound housing decisions

To say that buying a home is always better than renting oversimplifies a complex calculus. Renting — with or without roommates — may actually make more sense for a young adult’s lifestyle. While homeownership comes with the benefits of built-up equity and potential real estate appreciation over time, it also means being on the hook to fix issues like leaky plumbing and broken appliances as they arise. And while you could pay someone to attend to these tasks, that's something you'll need to account for in your cost-benefit analysis. Before making a major financial commitment, consider whether renting or owning is better for you right now.

Pay yourself first

In financial speak, “compounding” means earning returns on both the initial investment and the previously acquired returns. It’s a powerful phenomenon both when saving for retirement and with any other investing you do, particularly if you start young. While it's easy to be distracted by imminent expenses, you should regard saving and investing as “paying yourself first.”

Set aside a consistent portion of your income to your own savings before attending to other obligations. After you’ve established a sufficient emergency fund, seeking the guidance of a financial professional is a smart way to ensure that investments are properly diversified to be in line with your risk tolerance, time horizon and goals.

Look way, way ahead

Plan for retirement now? That advice can sound unbelievable when you’re just starting your career. But the earlier you can make retirement contributions, the better off you will be. Don’t just sock retirement money away into a typical savings account, however. You’ll earn more with a dedicated retirement plan, such as an employer-sponsored retirement plan, particularly if your company offers matching or profit sharing.

Another option is an individual retirement account (IRA). If you open a traditional IRA, you won’t pay taxes during the life of the account. And because these funds can't be tapped into without penalty until you’re 59-and-a-half, it’s a great way to shield your future financial security from today's spending temptations.

Work your benefits into your plan

Beyond retirement benefits, your employer may offer additional perks such as life insurance, medical and dental coverage, and disability insurance. Evaluating plan options is not always a straightforward apples-to-apples comparison though. A financial professional has the experience and expertise to look at how your new job could interact with your overall financial plan.

With a smart financial plan, you can use your 20s and 30s to not only get into a rhythm of sensible cashflow management but also to lay the groundwork for a secure financial future.

This article is written by Albuquerque Journal N.M. from Tribune Content Agency and was legally licensed via the Tribune Content Agency through the DiveMarketplace by Industry Dive. Please direct all licensing questions to legal@industrydive.com.