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• Apr 25, 2024

For recent college graduates, this new stage of life is filled with both excitement and challenges. Money management can be one of the most daunting tasks for newly independent alumni.

Mark Hasenauer, TD Wealth's Planning and Goals Based Advice Leader, provided five short lessons (no exam afterwards) on how to effectively manage your finances and prepare for the future as a recent graduate.

Pay off your student loan debt as fast as possible

Try to prioritize paying off student loan debt quickly. Paying off these loans quickly will:

  • Avoid payment of more interest over time
  • Position you to more easily obtain or refinance debt for a business venture, or home purchase under better terms in the future.

Consider the payment of your student loan debt as an investment in your future financial freedom. Living at home with your parents for a while (if possible) will significantly help the process of paying off student loan debt since you won't be saddled with the many expenses associated with living on your own, which can require a substantial portion of your income.

Open and contribute to a 401k annually

If your employer offers it, take advantage of a 401k match. This is a great way to help secure your financial future. Depending on the rate at which your employer matches your contributions, it can add up to a 100% return on your initial investment.

Starting early, and consistently contributing as much as you can annually until you reach retirement age, also harnesses the power of compounding interest. This results in substantially more savings as compared to starting to save for retirement later in your career. If you start later, your money won’t compound as much. It is crucial to take the time to put money away and get used to paying for the future you!

Consider Roth IRAs and Traditional IRAs

Choosing between a Roth IRA and a Traditional IRA involves understanding the tax implications that affect your future savings. Both have advantages and disadvantages, so consider what is best for your situation.

When putting money into a Traditional IRA, your contributions are tax free, meaning that the contribution is deducted from your taxable income. However, all withdrawals are taxed.

With a Roth IRA, the money that you contribute is not tax free, but you will not be taxed upon withdrawal.

You cannot withdrawal assets from a Roth or Traditional IRA without penalty until you reach the age of 59 and ½.

Be smart about credit card management

Maintaining a healthy credit score is crucial for financial stability. To achieve this, prioritize timely payments of all credit card bills and avoid excessive usage. One way to establish credit early in your journey is, if possible, for your parents to provide a starter credit card.

Alternatively, being added as an authorized user to an existing card allows you to piggyback on its established credit history, aiding in building your own credit profile. Keep in mind that opening new credit cards can seem attractive due to incentives, but opening multiple credit cards may not be helpful for your credit score.

Revolving debt which is paid on time, such as a car payment, is a helpful way to boost your credit score. These proactive measures safeguard your financial future. The worst time to worry about the health of your credit is when you really need it!

Build an emergency fund

It is important to start putting money into a cash account such as a simple savings account as an emergency fund. While the ideal amount of savings varies depending individual circumstances, having an emergency fund equivalent to at least 6 months of expenses is good rule of thumb. The point is to provide yourself with time and flexibility while navigating unforeseen circumstances.

This emergency fund provides a financial safety net if and when life throws you a curveball, providing peace of mind and stability. An emergency fund in a savings account is also more cost effective than resorting to using credit cards or other forms of debt that charge high rates of interest.

While it may seem counterintuitive for your money to sit in a low interest savings account, it is the best way to make sure that you have a buffer that is not subject to market volatility or fees in case you find yourself unemployed or facing an unplanned expense. Mark’s recommendation is to “save until it hurts!”

For more on personal finance topics

If you have more questions about this topic or other personal finance topics that matter to you, visit the Learning Center on TD Bank’s website. You can find out more information about TD Bank's services at

We hope you found this helpful. This article is based on information available as of April 2024 and is subject to change. It is being provided as a convenience and for general information purposes only. This content is not intended to provide legal, tax, investment, or financial advice or to indicate that a particular TD Bank, TD Bank affiliate, or third-party product or service is available or right for you.

For specific advice about your unique circumstances, consider talking with a registered financial professional.

TD Wealth® Disclaimers

TD Wealth® is a brand of TD Bank N.A., member FDIC (TD Bank). Banking, investment management and trust services are available through TD Bank. Securities and investment advisory products are available through TD Private Client Wealth LLC, a U.S. Securities and Exchange Commission registered investment adviser and broker-dealer and member FINRA/SIPC (TDPCW). Epoch Investment Partners, Inc. (Epoch) is a U.S. Securities and Exchange Commission registered investment adviser that provides investment management services to TD Wealth®. TD Bank, TDPCW and Epoch are affiliates.

The information contained herein is current as of April 2024. The views expressed are those of the guest author and are subject to change based on tax and other laws. The information provided here is for educational purposes only.

The planning strategies mentioned here may not be suitable or tax efficient for you. You should review the strategies discussed with your legal counsel, independent tax advisor and accountant/CPA prior to making any decisions.

Federal and state tax rules and requirements are subject to frequent change. TD Wealth® does not provide legal, tax or accounting advice to its clients. This article is not a substitute for such professional advice or services. It should not be relied upon by you, your estate, your fiduciaries, or any of your beneficiaries as legal or tax advice or as a basis for any decision or action that my affect your finances. Prior to making any decision or taking any action that may impact your estate plan, you should consult with your attorney, independent tax advisor and accountant/CPA for a complete analysis of the legal and tax implications applicable to your particular situation.

TD Bank and its affiliates are not liable for any errors or omissions, and you understand that this summary is general in its scope; educational only in nature; and may not be relied upon as investment, legal or tax advice in making any determination whether to take action. TD Wealth® is not responsible for any loss sustained by any person who relies on this summary.

TD Bank and its affiliates and related entities provide services only to qualified institutions and investors. This material is not an offer to any person in any jurisdiction where unlawful or unauthorized. No part of this publication may be reproduced in any form, or referred to in any other publication, without express written permission. All rights reserved. All trademarks are the property of their respective owners. The TD logo and other trade-marks are the property of The Toronto-Dominion Bank or a wholly-owned subsidiary, in Canada and/or other countries.

©2024, TD Bank, N.A.

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