Financial Planning for Recent College Graduates

May 30, 2023

Six Steps to Prepare for Long-Term Success

Graduating from college is a major milestone, but it can also be a daunting time for many young adults as they transition into the “real world”. If you have a recent college graduate in your life, they may be facing a number of financial challenges, from student loan debt to finding their first job. Financial planning may be the last thing on their mind, but you can use your influence and experience to help them see the benefit of taking financial planning steps as a recent college graduate in order to set themselves up for long-term success.

Share the six steps below to help them get started.

Financial Planning for Recent College Graduates Tip #1: Create a Budget

The first step in any financial plan is to create a budget. Don’t think of it as something that constrains you. Rather, consider your budget a tool to balance spending on needs and wants, and to help you achieve your goals. Creating a budget helps you understand where your money is going and where you can make adjustments to save more. Start by listing all of your monthly income and expenses, including rent, utilities, groceries, transportation, and any debt payments, such as student loans. Then, look for areas where you can cut back, such as eating out less or finding a more cost-effective apartment. Be sure to set aside some money each month for savings, as well. (More on that below.)

Financial Planning for Recent College Graduates Tip #2: Make a Plan to Pay Off Student Loans

Student loan debt is a major concern for many recent college graduates. If you have student loans, make a plan to pay them off as quickly as possible. Consider consolidating your loans or refinancing them to get a lower interest rate. You may also want to explore income-driven repayment plans, which can reduce your monthly payments based on your income.

Financial Planning for Recent College Graduates Tip #3: Start Saving for Retirement Now

It’s never too early to start saving for retirement – even if you’re in your early twenties. When you begin your first professional job, be sure to take advantage of your employer’s 401(k). If they don’t offer one or you dislike the plan details, you can also open your own individual retirement account (IRA). The earlier you start saving, the more time your money has to grow. Your future self will thank you!

Related Article: How Inflation Impacts Wealth Management and Investment Strategies

Financial Planning for Recent College Graduates Tip #4: Plan to Navigate Rainy Days

Life is unpredictable, and you never know when you might face an unexpected expense or job loss. That’s why it’s important to build an emergency fund so you won’t be forced into debt on rainy days – or seasons of life. Aim to save three to six months’ worth of living expenses in a separate savings account. This will give you a financial cushion in case of an emergency, and it will give you peace of mind, too.

Financial Planning for Recent College Graduates Tip #5: Understand and Protect Your Credit Score

Your credit score is an important factor in many financial decisions, such as getting a loan or renting an apartment. Make sure you understand what affects your credit score, such as paying bills on time and keeping your credit card balances low. It’s important to protect your credit score, too, so check your report regularly to make sure there are no errors or fraudulent activity. Check out this resource from the Consumer Financial Protection Bureau to learn more.

Financial Planning for Recent College Graduates Tip #6: Set Financial Goals

Another important step in financial planning for anyone – recent college graduates included – is to set financial goals. These could be anything from saving for a down payment on a house to paying off your student loans by a certain date. Having clear goals will help you stay motivated and focused on your financial plan.

Recent College Graduates Should Begin Financial Planning Now

Graduating from college is a big win and something to be proud of. It’s also a time of significant transition for many people, and it’s important to start off on the right foot financially in order to protect your future. Use the six steps above to take control of your finances now and set yourself up for long-term financial success.

If you’d like to discuss financial planning for recent college graduates, contact Lane Hipple Wealth Management Group at our Moorestown, NJ office by calling 856-452-8026, emailing info@lanehipple.com, or to schedule a complimentary discovery call, use this link to find a convenient time.

Illuminated Advisors is the original creator of the content shared herein. I have been granted a license in perpetuity to publish this article on my website’s blog and share its contents on social media platforms. I have no right to distribute the articles, or any other content provided to me, or my Firm, by Illuminated Advisors in a printed or otherwise non-digital format. I am not permitted to use the content provided to me or my firm by Illuminated Advisors in videos, audio publications, or in books of any kind.

The New Retirement Rules

March 8, 2023

Highlights of the SECURE Act 2.0

5 Ways a Financial Advisor Can Help You Prepare for Tax Season

March 1, 2023

A Strong Tax Strategy is Part of a Thoughtful, Comprehensive Financial Plan

Tax season is upon us and, while not every financial advisor is a Certified Public Accountant (CPA), that doesn’t mean they can’t be helpful. Your financial advisor can assist you with making strategic tax moves throughout the year to help reduce your overall tax burden. As you read below, keep in mind that the sooner you begin having these conversations with your advisor about your tax strategy, the better off you’ll be at tax time.

Finding Ways to Maximize Your Tax Savings

There are many financial moves you can make throughout the year that will result in paying lower taxes, and a financial advisor will be educated about them. For example, some investment accounts let you make tax-deferred contributions, which can offer you the opportunity to save money on taxes while working to build your retirement savings. Take a company-sponsored 401(k), for instance. If you max out your contributions to this account, all of the money going in is pre-taxed, so you’ll be putting money away for retirement while reducing your tax bill in the present.

Keeping Record of Your Capital Gains and Losses

When filing your taxes, you’ll have to know how much you earned and lost from your investments for that year. A financial advisor will have an accurate and consistent record of your investments, which they can give to your accountant on your behalf. This will save you time and energy, and help you ensure you’re paying appropriate capital gains tax, without over-paying.

Developing a Tax-Savvy Gifting Strategy

There’s a lot to be gained when we gift our money to others. Not only do you get the intrinsic rewards associated with the joy and meaning that comes from helping others, but you can enjoy valuable tax benefits, too. Sit down with your financial advisor and discuss how you can gift your money in ways that ultimately help lower your tax bill, too. And this isn’t just for charities; if you want to give money to your family members for any reason, there are plenty of gifting strategies that let you transfer your wealth without a tax penalty. Check-in with your financial advisor before making any gifts so you can be sure to maximize the opportunity.

8 Considerations For Passing an Inheritance To Your Children

Minimizing the Tax Burden that RMDs Bring

Once you reach the age of 73, you’ll have to begin taking out Required Minimum Distributions (RMDs) from any IRA or 401(k) accounts that you have. While this comes as no surprise, often the uptick in your tax bill from having to pay income tax on those distributions does come as a surprise to retirees. A financial advisor will be able to provide you with management strategies so that you can lower your tax liabilities and be more prepared when the time comes to begin taking distributions.

Determining Tax-Efficient Investment Strategies

Although a financial advisor can’t necessarily protect you from capital gains tax, they will be able to help you by implementing strategies such as tax-loss harvesting, offsetting gains with losses, and avoiding issues such as “phantom tax,” which limit your overall tax liability. So, they’ll not only be able to help you manage and balance a portfolio, but they’ll be able to ensure you’re following the best investment strategies to benefit you the most when it comes time to file your taxes.

Do You Need a Financial Advisor to Assist with a Tax Strategy?

The world of taxes can be incredibly confusing, especially considering they’re constantly changing depending on the economy and new legislation. Having a financial advisor you trust is an important addition to your tax planning arsenal. A financial advisor can guide you throughout the year to ensure you’re making the best financial choices to help boost your tax strategy, with the ultimate goal of allowing you to save more of your hard-earned dollars.

If you think you would benefit from a conversation about your tax strategy, contact Lane Hipple Wealth Management Group at our Moorestown, NJ office by calling 856-638-1855, emailing info@lanehipple.com, or to schedule a complimentary discovery call, use this link to find a convenient time.

Illuminated Advisors is the original creator of the content shared herein. I have been granted a license in perpetuity to publish this article on my website’s blog and share its contents on social media platforms. I have no right to distribute the articles, or any other content provided to me, or my Firm, by Illuminated Advisors in a printed or otherwise non-digital format. I am not permitted to use the content provided to me or my firm by Illuminated Advisors in videos, audio publications, or in books of any kind.

Existing Home Sales Drop for 12th Straight Month, Lowest Since 2010

February 22, 2023

On Tuesday, the National Association of Realtors reported that existing-home sales fell for the 12^th straight month in January. In addition, month-over-month sales were mixed among the four major U.S. regions, as the South and West registered increases, while the East and Midwest experienced declines. All regions recorded year-over-year declines.

Housing Highlights

• Existing-home sales waned for the twelfth consecutive month to a seasonally adjusted annual rate of 4.00 million. Sales slipped 0.7% from December 2022 and 36.9% from the previous year.
• The median existing-home sales price increased 1.3% from one year ago to $359,000.
• The inventory of unsold existing homes grew from the prior month to 980,000 at the end of January, or the equivalent of 2.9 months’ supply at the current monthly sales pace.

Bottoming Out?

“Home sales are bottoming out. Prices vary depending on a market’s affordability, with lower-priced regions witnessing modest growth and more expensive regions experiencing declines. Inventory remains low, but buyers are beginning to have better negotiating power.

Homes sitting on the market for more than 60 days can be purchased for around 10% less than the original list price.”

• The median existing-home pricefor all housing types in January was $359,000, an increase of 1.3% from January 2022 ($354,300), as prices climbed in three out of four U.S. regions while falling in the West.
• This marks 131 consecutive months of year-over-year increases, the longest-running streak on record.
• Properties typically remained on the market for 33 days in January, up from 26 in December and 19 in January 2022. 54% of homes sold in January were on the market for less than a month.

Location, Location, Location

• Existing-home sales in the Northeast retracted 3.8% from December, down 35.9% from January 2022. The median price in the Northeast was $383,000, up 0.3% from the previous year.
• In the Midwest, existing-home sales slid 5.0% from the previous month, declining 33.3% from one year ago. The median price in the Midwest was $252,300, up 2.7% from January 2022.
• Existing-home sales in the South rose 1.1% in January from December, a 36.6% decrease from the prior year. The median price in the South was $332,500, an increase of 3.4% from one year ago.
• In the West, existing-home sales elevated 2.9% in January, down 42.4% from the previous year. The median price in the West was $525,200, down 4.6% from January 2022.

Sources: nar.realtor

Conference Board Leading & Coincident Economic Indicators Pointing to a Recession

January 25, 2023

The Conference Board was founded in 1916 by a group of CEOs “concerned about the impact of workplace issues on business, and with a desire for greater cooperation and knowledge sharing among businesses.”

Every month, the Conference Board compiles a composite of economic indexes designed to signal peaks and troughs in the business cycle. The leading, coincident, and lagging economic indexes are essentially composite averages of 10 individual indicators and help smooth out some of the volatility of individual components.

The ten components include:

• Average weekly hours, manufacturing
• Average weekly initial claims for unemployment insurance
• Manufacturers’ new orders, consumer goods and materials
• ISM Index of New Orders
• Manufacturers’ new orders, nondefense capital goods excluding aircraft orders
• Building permits, new private housing units
• Stock prices, 500 common stocks
• Leading Credit Index
• Interest rate spread, 10-year Treasury bonds less federal funds
• Average consumer expectations for business conditions

Leading Indicators Signaling a Recession

On January 23^rd, the Conference Board announced that its Leading Economic Index for the U.S. decreased by 1.0% in December 2022 to 110.5 (2016=100), following a decline of 1.1% in November.

The LEI is now down 4.2% over the six-month period between June and December 2022 – a much steeper rate of decline than its 1.9% contraction over the previous six-month period (December 2021–June 2022).

“The US LEI fell sharply again in December – continuing to signal recession for the US economy in the near term. There was widespread weakness among leading indicators in December, indicating deteriorating conditions for labor markets, manufacturing, housing construction, and financial markets in the months ahead.

Meanwhile, the coincident economic index (CEI) has not weakened in the same fashion as the LEI because labor market related indicators (employment and personal income) remain robust. Nonetheless, industrial production – also a component of the CEI – fell for the third straight month.

Overall economic activity is likely to turn negative in the coming quarters before picking up again in the final quarter of 2023.”

The trajectory of the US LEI continues to signal a recession 

Sources: conference-board.org