Financial freedom can feel a long way off for recent college grads. With student loans and a starting salary, money can be tight. With graduation coming up in less than two months, I was excited to chance upon meeting Janine Rogan, a tax accountant and personal finance/ lifestyle blogger. After hearing about her passion for empowering women to take control of their personal finances, I obviously needed to ask her a few questions and request some words of wisdom. Here are the personal finance tips for college grads that she had to offer:
Ali: Most of us have it… Is there any real strategy to paying off student debt? Is sticking to the minimum payment enough? What advice do you have on paying it off? Is there a percentage of our salaries that we should delegate toward this, etc.?
Janine: I would say in terms of strategy, you need to line up all of your debt and determine which one has the highest interest rate. This is the one that you need to pay off first. Once you have determined this, I would say that you should aim to pay off your debt as fast as possible. Definitely pay more than the minimum balance! That being said, you still need to have room in your budget to slowly grow your savings account and have a little bit of fun money. It’s definitely a balance game!
A: Speaking of percentages… Is there a foolproof way to budget your money? How much of your salary do you think should be spent on fixed expenses, flexible spending, etc.?
J: It’s going to be different for everyone, based on what your living costs are. As a general rule, living on less than 50% of your income is a good idea. Then you can put the rest towards savings, debt and your variable expenses than might come up during the month.
*For my own personal budget, I have been looking a lot into the 50/20/30 method. It sounds a lot like the advice Janine is giving us!
A: With all of these newly acquired bills, how do you suggest young professionals cut back on expenses and save a little extra money each month?
J: There are lots of ways to cut back expenses; the best way to see what you can cut from your budget is to track your expenses for at least a month and see where you are spending your money. If it doesn’t align with your values, then you need to readjust. Likewise if there are expenses that you are shocked by, it might be time to cut back. If you are finding it hard to cut back, it might be time to increase your income.
A: If a recent grad has money to spare after paying the bills, making her student loan payment and saving a little, do you think she should be investing? Or is her money better put in her savings account or added to her student loan payment? When should we first consider investing?
J: Absolutely! The earlier you start investing, the better! Some of your income should be allocated to your savings account. It’s really important to have an emergency fund, and you should be putting as much as you can toward your debt… however, socking a small sum of money into something that will grow your nest egg over the next few decades is a good idea!
A: What do you believe is the biggest mistake young 20-somethings are making with their finances? How can we avoid making it?
J: I think not caring about money is the biggest mistake. A lot of young people think they have all the time in the world to think about their finances, but the truth is the sooner you get your financial ducks in a row, the better off you’ll be.
A: I’m really hoping that I’m not the only one who has never filed their own taxes, so I’m going to ask: what are the most important things recent grads should know before they file their own taxes for the first time?
J: No, you definitely aren’t. There are a lot of people that don’t know a lot about taxes, and usually it’s because the tax system is so daunting. I think all new grads should know the basics. Know how much money you’re making and about how much you should be paying in taxes a year (there are lots of online calculators available). The IRS and CRA aren’t perfect and make mistakes sometimes, so it is important to know what you should be paying.
*Janine just launched her first product: a guide to filing your taxes, and it’s free! Be sure to check it out if you need a little help in this area… I sure do! According to her blog, My Pennies, My Thoughts, “there’s also a few tips in there for students, couples, homebuyers and self-employed individuals.“
A: Are there any last minute words of wisdom that you think college grads need to hear in order to take control of their personal finances?
J: Being in control of your money gives you the freedom to spend your money on the things that actually count and will make a difference in your life, so take control of your money as soon as you can; it’s one of the most powerful tools you can have.
*Want to hear more personal finance tips from Janine? Check out her blog, My Pennies, My Thoughts!
Comment below what your personal finance questions are.