Monday, March 26, 2007

New Graduates and Focusing on Finances, Part Two

On Friday, I wrote about the first two foci I think a graduating college student should have as they begin their new life in the working world. Today, I'll continue with the next two. (Yeah, I know I technically said "tomorrow" on Friday, but I had a hectic weekend of dog-sitting. Trust me, they're monsters.)

Focus #3: Get a high-interest savings account.
I've already spoken at length of the benefits of the high-interest savings accounts like ING Direct and HSBC available on the internet. They provide security, flexibility, and an interest rate that actually makes you some money. In order to have a place to stash some cash for both short and long-term savings, you need a high-interest savings account. My favorite, for a plethora of reasons, is ING Direct. So, get an account, transfer your first dollars, and familiarize yourself with their functionality.

Focus #4: Start an emergency fund, and fund it automatically.
It's absolutely critical that you have an amount of money easily available to you for emergency situations. Things go awry in the real world: roofs leak, cars break down, and ambulance trips are required. In order to keep on track for your long term financial goals, you've got to have an emergency fund to cover these unexpected events. Ideally, you should have about six months of living expenses, but for most graduates (in fact, most people in general), that's a pretty tall order. At a bare minimum, keep at least $1000 earmarked for emergencies.

You've also got to fund it automatically. It doesn't have to be much (MLB and I only put in $40 a month), but it does need to be regular. This helps to avoid excuses like "I'll put some money in next week," and, "I just forgot last month.", and keep you on track. Finally, you need to completely forget that you even have an emergency fund exist, right up until you need to tap into it. No using it for TVs or guitars!

Numbers five and six will continue tomorrow.


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