Dani’s Declassified Guide to Personal Finance

To the class of 2021 – Congratulations! To help you as you start most likely your first full time role in STEM post-graduation, I have compiled my personal finance priorities to help you all! These were my priorities in order once I had started my first full-time job in 2017 in the United States. You can definitely start these thing earlier if you are financially able to do so!

As this is my first personal finance blog post, I want to mention that personal finance is well….personal. What may work for me and my in alignment with my values, risk tolerance, and current situation may not work for you, but I hope by sharing my priorities that it will help you set yours!

Disclaimer: I am not a licensed attorney, accountant, or financial advisor. The information below is for educational purposes only and not a substitute for professional legal, tax, investment, financial, or other advice. 

Here are my personal finance priorities post-graduation so that you can be ready from day 1:

1. Max out your 401k up to your employer match if you have one.

If your employee offers a 401K match (mine does not), your first priority should be maxing out your 401K to that match. So if they offer up to a 4% match, you should be allotting at least 4% to your 401k to get that match. I can’t stress this enough – because that is free money!

I know this is easier said than done, but having a budget of income and expenses can help you figure out how much you can set aside for each priority and how quickly for this full list. The nice thing about automatic 401k deductions it is great example of ‘set it and forget it’ since it will taken directly from your pay check.

Your 401(k) will probably give you a variety of pre-selected funds to put your money into. These can be target date funds or other type of mutual/index funds. Make sure to know the expense ratios of wherever you are putting your money into as they can a significant effect on your portfolio over the long term.

For investing outside of your 401(k) you will probably have the option of investing in individual stocks, more specific ETFs or other alternative investments. Make sure to select the investment vehicle that aligns with your experience, how involved you’d like to be and risk tolerance. Each type of vehicle comes with a different risk/reward and is analyzed differently.

2. Pay down debt with high interest.

Since I did not have a 401K match, my first priority was starting to pay down debt with high interest. My personal threshold for high interest? Debts over 5% interest which was my 1 private student loan that was about $20,000 total.

3. 6-month emergency fund in HYSA

The idea of an emergency fund is if you lost your job tomorrow, would you be able to continue in your current situation while looking for another job? Or some other large unforeseen expense like hospital bills for you or your pet. This is worked on simultaneously with paying down my high interest student loan. Typically you want your goal to be to have 3 to 6 months of expenses in a high yield savings account (HYSA). I personally use Ally which is completely online. This is one that particularly brings into the important of a budget, as to know how much you usually spend in a month a budget is important to track those expenses! The 3 to 6 month range really depends on your situation. With no kids and currently renting an apartment, I chose to only save up to 4 months in my high yield savings account. The upper range is typically 6 months regardless of your situation is because any more than 6 months you end up with too much cash that could be better used for investing. A HYSA can also be a great place for saving money for a large purchase like if you will be buying a house soon or planning a wedding.

4. Max out Roth IRA

Roth Individual Retirement Account (IRA) is another common retirement account! Annually at the income level I am in, I can contribute up to $6,000 maximum annually which I have been maxing out the past few years. Also make sure that you are not only adding money to your Roth IRA, but also assigning it to specific funds.

5. Reassess additional contribution to 401k

After I have maxed out my Roth IRA for the year, I reassess my contribution to my 401k. I am now closer to 20% now, but when I first started out I was closer to 7% to 10% as my contribution into my 401k. Unlike the Roth IRA, the maximum annual contribution for a 401k is $19,500. Most likely whatever provider your company uses for 401k with let you model how changing your contribution rate and other assumptions would affect your forecast up to your target retirement age. Because this is an important point, I would add that if your budget or current expenses do not allow you to max out your 401(k), it’s worth contributing at least to whatever amount you need to maximize your employer’s match, if they provide it!

6. Taxable Investments (like stocks)

Invest as early and as often as possible as time in the market almost always beats timing the market. I also recommend that you don’t invest in anything you don’t understand.

Most of my investments are in ETFs, some separate stocks, and very little in crypto. Crypto is still somewhat emerging, so I consider this my ‘YOLO’ investment (less than 5% of my total taxable investments) as it is much more of a gamble than traditional investing.

Also always diversify to mitigate risk! For example with crypto, I reccomend that you choose a stable coin, a volatile coin, and a foreign coin.

Look at your investments as a whole and check that you are diversifying between type, risk, and category.

I hope this helps you on your personal finance journey!

What questions do you have about personal finance? How is your Credit Score Calculated? How can I check my Credit Report? How do I start budgeting? I would be happy to answer them on Instagram or through a future blog post!

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