Top Money Tips for College Grads
Tune in to this week’s edition of Money, I’m Home with Lynne Jarman-Johnson to discuss top money tips for recent college graduates with Consumers @Work Manager Scott Dobson.
0:00:06.7 Lynne Jarman-Johnson (LJJ): Money, I’m home! Welcome in. I’m Lynne Jarman-Johnson with Consumers Credit Union. And joining us today is Scott Dobson, and we have some great tips for anyone who is… Oh my goodness, is it time, yup, to grab that person, right. How exciting! It’s an exciting time of life, you’re either graduating maybe from a trade school or college, or you went right into the workplace. What are the top three things we should look to do to make the most of our money, Scott?
0:00:35.4 Scott Dobson (SD): Well, I’ve been thinking about this one, Lynne, and I just thought back to myself when I got out of college and first got my first real job with a real paycheck, like boy, if I could go back and give myself advice of three things I should have thought about right then, I think the first thing that I would say is use technology to make my personal financial life easier. Set up direct deposit of your paycheck, set up automatic payment of all your bills that you have online, use online and mobile banking to understand how much money you have in your account and when your next check coming in, so really taking advantage of that easy technology from the get-go can make it a lot easier to see your personal finances and understand where you are on a day-to-day basis.
0:01:19.3 LJJ: Scott, how important is it that someone takes a look at what their company offers if they’re getting their first paycheck and then getting on board with anything like 401K matches?
0:01:30.9 SD: Perfect. That was my… My second thing is the number one, save from your very first paycheck. My dad told me this lesson when I was 19 years old, it’s really hard to do, but after you do it, it’s really easy. So, there are options for saving money. Most companies offer an option, you’ve probably heard of a 401K, super common for companies to offer that, it’s an investment vehicle, it’s for you to save money for yourself when you retire. So, one of the best things about it, I say, if you’re going to say for retirement, the very first thing you should do is investigate your employer’s 401K. I say that because oftentimes they have a company match, you invest 5% of your paycheck, they’ll match it with half of that or put 2% in. Any match that you can get from your company is free money for you, so if you’re doing something for your very first paycheck, it is invest in the 401K and max… At least max out of the match the company gives you or the maximum that they’ll let you put in. If they let put in 10% of your pay and you make $50,000 a year, that man, I’m taking $5,000 out of my paycheck next year by saving this money.
0:02:40.8 SD: But honestly, after your first paycheck, if it’s a new paycheck, it comes out before you even get it, you’ll never notice it, you’ll never notice that that little bit of money is gone and at the end of the month, it’s a little bit, but at the end of the year, $5,000, and if you’ve worked for some place for 10 years, that’s $50,000 of your own money that you saved plus the match that you get from them, plus any growth in the investment that you’ve gotten. So, man, you go to work to earn money and to help have money for yourself through your whole life, so do yourself a favor and max out the free money that you can get from your employer. If you’re doing great, if you don’t have any bills, like, “Boy, I wish I could save more,” I would say start with that. Then there’s other investment vehicles, just get a Roth IRA or a normal IRA, you can invest some money in that. In fact, if you’ve invested in all that, and you still got money to throw around, buy some Bitcoin or something. I don’t care what you do with it.
0:03:36.1 LJJ: You bring up Bitcoin and that really, for some people, it is so daunting and not understandable. I just read an article about the fact that Bitcoin now is like almost like online banking 10 years ago, where you were really reticent about not knowing how to use something or do something, and then all of a sudden, you learn how, but what should you look out for if you are looking at things like Bitcoin or Doge, or all the things that are out there that is crypto money?
0:04:05.5 SD: Yeah, I would say… First, I’ll say I’m not an investment advisor, so I’m talking in broad generalizations here and not offering any specific investment advice at all, but the broadest piece of financial advice for investing that I ever got was “Invest in what you know.” So, if you take a company like Colgate, they make toothpaste, they sell you toothpaste, they make money. If you invest with them, that’s how you make money. With Bitcoin, for myself, someone who’s spent some time trying to really understand it, it is complicated. It is not easy to see how an investment in Bitcoin would strategically pay off for you. Probably if you watch TikTok, you’ve probably seen someone who said, “I bought 4 coins and now I am a millionaire,” so those are very tempting, but I would say “Boy, if you’re trying to invest for your retirement, start with what your company offers. Invest in a traditional 401K,” but if you’ve got some extra money like, “Boy, this money might get me to the moon,” give it a shot, but understand that it’s extremely complicated, and it might be more of your play money, not “I need this money to depend on my retirement.”
0:05:18.1 SD: So, if you’re going to go to the casino and play Black Jack or if you’re going to buy a Bitcoin, probably about the same. Either one of them could make you return, but I’m not sure you really know what you’re going to end up with, with a return or not. But you probably know if you invest in your 401K for 20 years at your employer, you’re probably going to have a significant investment, so it’s not saying that you could make a lot of money with them, but I would use your money that you can afford to lose, if it all did just disappear or things changed.
0:05:46.6 LJJ: I love the fact that you say, look, if there’s a difference between your life money, like meaning here’s what I need to pay my bills to be successful, to get good credit, and then there’s your entertainment money, which is a very different bucket of dollars.
0:06:00.4 SD: Yes, as long as you can separate that if you’re investing in Bitcoin and it’s 100% of your retirement, or you’re not paying your monthly bills in order to buy a coin, that may not be financially sound, but if it’s your, “Well, I’ve got $100 and what if it turned into $1,000, I think it’ll give a shot, and if I lose my 100, oh, well, it was my fun money anyway,” probably perfect time.
0:06:23.5 LJJ: Your first tip was really focusing on learning those technologies that are out there to help you on a day-to-day basis, your second is to save for yourself, really start saving the minute that you get a paycheck. What’s your third?
0:06:37.1 SD: Absolutely. Don’t damage your credit. There’s lots of ways to hurt your credit score, there’s lots of ways to make it harder for you to use credit for what you really want it for down the road, and it’s very easy to damage it, so don’t do things that lower your credit score. Don’t apply for every store card that you can get, don’t buy a motorcycle and finance it if you don’t need it. Think about credit, you’re done with school, you’ve got a real job and you’re a grown up, what is credit for? Number one thing is for buying a house, I would say, so, think of credit in those terms that you want to build a great credit score, so when you go to buy your home, you’re in great shape and you know what you’re doing financially, so I would think in those terms that getting 30% off your bill for buying clothes on a Saturday is not a good way to protect your credit. Paying a bill 35 days late because you just didn’t save the money for it, really damages your credit.
0:07:36.4 SD: So, really think about not doing things to damage your credit: don’t open up new credit if you don’t need it, don’t pay anything late. So, using the technology that I talked about earlier can really, really help you with that, but be conscious of it. A negative credit can hang with you for quite a while. It’ll probably really make you feel worse about yourself, and it’s not hard to take care of it and be on top of it, and then have a great credit score when you download our app and get ready to get your first mortgage, so I think that’d be my third top suggestion.
0:08:04.8 LJJ: Well, these are absolute great tips, and I just want to add a fourth and that is never feel afraid to ask for help.
0:08:12.9 SD: Yes, we’ve all been there! I know you shouldn’t have credit card debt because I bought a TV once in college and paid it off nine years later, so…
0:08:21.5 LJJ: Do you still have that TV? [laughter]
0:08:22.0 SD: You know, I’m old, it was one of those big fat… It was a foot thick and a 55″ or so. No, that TV was gone before I had it paid off. That’s what a terrible financial decision that was, and it’s the exact kind of stuff that we can teach younger people to stay out of, so they have that $3,000 to put down on their house instead of “poof.”
0:08:45.0 LJJ: Well, thank you so much Scott. We are here for you at Consumers Credit Union. If you do have questions, stop in any office or pick up the phone, or you know what, you could even go online and connect with us, we’d love to hear from you. I’m Lynne Jarman-Johnson. Thank you, Scott Dobson for all of your financial tips over the years, we sure do love it.
0:09:05.0 SD: Sure thing anytime.
0:09:06.5 LJJ: And thank you, Jake Esselink for your production skills, we sure do appreciate that too. You make us sound so good. Hey, listen up, if you have a topic, please send it our way, we’d love to share it and anytime head on to consumercu.org and find financial education topics just for you. I’m Lynne Jarman-Johnson with Consumers Credit Union.