College graduation season is approaching, which means for many, it is time to develop good money habits.
TEMPLE, Texas — College graduation season is approaching, which means many new graduates will enter the professional world. 6 News Anchor Kris Radcliffe said this is the perfect time to start making good money habits, also jokingly known as, “Adulting.”
Did you know that financially successful people pay themselves first? Radcliffe spoke to financial advisor Rolandus Johnson. He had some advice for those of you who are just entering the workforce.
“At some point in time, you’re going to get away from the business and want to enjoy life. So make paying yourself an expense and if you kind of go by that, you’ll be absolutely ok when that time comes,” Johnson said.
Johnson said you need to have a plan. Radcliffe said, like the old saying goes, “If you fail to plan, then you plan to fail!”
“Get with someone, plan it out. because if you don’t plan it out and you just start chunking money into a 401k not knowing how it works and then retirement sneaks up on you pretty fast these days and so you’re kind of stuck like, ‘Now what do I do?’ So I always advise that the second that you start making money whether it’s in a business, or a regular job coming out of college, enroll in the 401k,” Johnson said.
The company you work for will probably pay your salary and a portion of your benefits. If the company offers to match a portion of the money that you put into your 401k, Johnson said you need to take advantage of that offer.
“One quick tip. If they match, always enter your amount up to the maximum of the match. So if it’s 5%, you put in 5%, 3% you put in 3%. I have a saying in my practice, ‘Take free money when free money is given to you!'” Johnson said.
Without getting too technical, where should we put our money, and how much should we set aside?
“As far as the income goes, I have a couple of rules of thumb. First rule of thumb is put 5-10% of your income away. That is usually kind of a safe amount that you can put away, and as your financial plan or financial situation grows, you can increase that amount,” Johnson said. “And as far as where or what you should invest in, I use the wall street rule of thumb. So take your age, so for me, I’m 36. I would put 36% of my money going toward something safe, and the remainder going towards market assets that can grow pretty aggressively so that’s uh kind of the rule of thumbs that I go by with that.”
Despite that the 401k is one of the best available retirement saving options for many people, only 32% of Americans are investing in one, according to the U.S. census bureau.