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Blog:A New Graduate's Guide To Building A Nest Egg


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If you have recently graduated from university, you may be looking forward with excitement toward a brave new horizon, a world of possibilities opening up before you. But you may also be venturing toward that horizon with more than a few misgivings. In fact, in some cases, you may have nothing but misgivings. A lot of graduates feel like they bought into a bait-and-switch with their educations. They are wading through a swamp of student loan debt and cannot even find a job in their field.


Whatever your situation, whether good or bad, you need to start thinking about retirement. That’s right—you need to be thinking about it now, even if you are also still busy thinking about how you will make it to next month.


So what can you do? Well, if you actually have a good job, there is probably quite a lot you can do. If you do not, you may be surprised to find there are still some things you can do to save money. You are not entirely helpless.


Contents

First, keep a monthly budget

The very first thing you need to do in order to save money is to understand the flow of the money you have to begin with. You probably know how much your monthly income is, but do you know how much you are actually spending? Do you sit down at least once a month (preferably more often than that) to calculate your expenses? Do you know whether you are in the black or the red, and most importantly, why you are either profiting or losing money?


When you understand where your money is going, you can start making changes which help you to hold onto as much of it as possible. And that brings me around to the next point.


Start cutting expenses 

You need to curb as many unnecessary expenses as humanly possible. Quite often, an “unnecessary” expense isn’t what you think. Obviously for example you need to eat. But do you need to spend what you do on it? If you change how you prepare food, maybe not. And you obviously need to pay for your utilities, but do you really need central heat in your home? Do you really need to wash your clothes as often as you do?


Look for areas where you can cut back. Run your budget every month to see if the changes you are making are bringing you closer to meeting your financial goals.


Get going with retirement plans

Once you get your finances roughly under control and you are profitable every month, you will hopefully get to a point where you can afford to put a little bit away toward your savings.


After you build a basic emergency fund, you can start thinking about putting away some of that money each month going forward into a retirement plan. There are numerous different forms that your investments can take, but I recommend that you begin by looking into the sponsored plans which are offered by your employer.


Are you in a situation where there are no employer-sponsored plans? If you are, do not be surprised—fewer and fewer companies are offering retirement plans anymore. Those that are still doing so are turning away from investments where the employer shoulders the risk, like pension plans, and toward plans where the employee assumes the risk, such as 401(k) plans.


If your employer offers nothing, or you have no employer but yourself, you can look into a traditional IRA, Roth IRA or Keogh Plan. There is always something available to you.


Use a robo-advisor 

While reading all of this is hopefully giving you at least some direction, there is no denying that the world of personal finance is a complicated and treacherous one to navigate. Chances are good that you still are feeling pretty lost at this point and are looking for some personal advice.


Where can you find that kind of guidance? You probably cannot afford to talk to a personal financial advisor, but you can use a software program called a robo-advisor to help you plot your course. You input your financial information, and the program generates useful personalized advice based on your situation.


There are a lot of different choices out there, but two of the most popular and powerful robo-advisors are Wealthfront and Betterment. To figure out which one you should use, I recommend that you think about your priorities and needs, and then read a review of Betterment and a review of Wealthfront to compare and contrast the two.


Building a nest egg can be very difficult when you are struggling just to budget for next month. But the sooner you start seriously thinking about and planning toward your retirement, the better. Because it is such a challenge in today’s world, that just makes it all the more important that you get an early start!


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