By John Wasik
There’s a lot they don’t tell you in college about money. Forget about Econ 101. I’m talking basic money survival.
First of all, every bank and financial service company will never offer you a free service – ever. They charge in less-than-transparent ways that can soak you everytime you use one of their services.
Second, the more you know about how this hidden system of fees works, the better off you’ll be. You’ll not only save money, but you’ll be able to sock away money in emergency and retirement funds. Here are my top five tips:
1. If You’re in Debt, Start a Repayment Plan Now.
It’s this simple: The sooner you pay off your college loans, the sooner you can build a retirement kitty, although I think you should be doing both. The same goes for credit card debt.
According to a recent survey by the Plan Sponsor Council of America, more than one quarter of employees report that student loans are holding them back from saving for retirement.
If you have federal loans, there are nine repayment plans. Pick the one that’s best for you.
2. Start Investing.
It doesn’t matter how much you put away, start taking money out of your paycheck to invest in your 401(k). If your company doesn’t have one, set up an IRA yourself.
Make your savings automatic by picking two index funds that invest in the global stock and bond markets. The lower the annual expense ratio for management, the better. If you’re paying more than 0.50% annually, you’re paying too much.
3. Avoid Prepaid Debit Cards.
Most of these cards, which require that you put money into a bank account before you use them, are loaded with fees. But only one-third of cards surveyed by Creditcards.com disclose these charges.
Look for no-fee debit cards. Try credit unions, which often have the lowest charges and may not nick you for using your card at “out of network” ATMs.
4. Don’t Use Brokers or Agents.
You can buy mutual funds, insurance policies and retirement plans online at no commission. Use a robo-advisor like Betterment or Personal Capital if you want to set up investment or retirement savings plans. You can sign up for free and manage them on your phone.
5. Don’t Let Emotions Get in Your Way.
If there’s one piece of advice that works over time, it’s this: The less you think about markets, performance and trying to make a million dollars, the better off you’ll be.
That means forget about trying to jump in and out of the market or trying to find the next Facebook or Google (Alphabet).
You may get lucky, but in most cases you’ll time your stock purchase badly and lose money. The best kinds of investments are global in nature and left alone for decades.
While you can’t know the future, you can know math. It’s really simple. Your investment will compound over time, but you have to leave it alone. A mutual fund earning just 5% a year will double in 14 years.
The more you invest, the more you can grow your nest egg. I know most graduates aren’t told this in commencement speeches, but it’s a lifelong lesson that pays for itself. It might have even more value than your degree.
This article was written by John Wasik from Forbes and was legally licensed through the NewsCred publisher network.