This advice is part of a series InvestorPlace.com has compiled, inviting academics from across the U.S. to share their thoughts on aspects of finance that new graduates should know. Their thoughts have been presented with little to no editing. Today’s entry comes to us from Scott Baier,
Professor and Department Chair of the John E. Walker Department of Economics at Clemson University, who spoke with InvestorPlace via email about financial advice for recent graduates.
Even in these turbulent times, some investment strategies should remain the same. One of the first recommendations is new graduates should begin to set some money aside in a relatively safe and liquid asset so they can potentially cover some unplanned expenditures.
Once they have $1,000 or $2,000 of emergency funds saved, they should start to save to more major events — like a long layoff or extended unemployment. Since most unemployment spells last fewer than six months, a simple rule of thumb is that your emergency funds should be equal to six months of income.
If you are having trouble making payments on your students loans because you are having a hard time finding a job or unemployment, the best thing you can do is contact your lender and see if you can delay payments.
If your income has changed and you an income based loan, you can re-certify your income and make lower payments. Finally, if you have a federal student loan you should check to see if your loan is covered under the CARES Act, If so, then you qualify for suspension of principal and interest payments.
Regarding the outbreak of novel coronavirus, it is still too early to tell if there has been any structural changes to the economy or financial markets and so for now, I would recommend the standard approach to savings and investments for those people who are starting to invest in the market.
As you start to invest in financial markets, you should invest in a broad-based portfolio of assets. When you are young you should try not to worry too much about day-to-day movements in stocks and other assets — you are investing for the long-run, and many of these short-run movements get ironed out over time.
However, this does not mean you should ignore longer moving trends; you should pay attention to the economic fundamentals and political trends that can impact the value of your portfolio. Of course, you should keep up with the financial and political news to help keep up with important factors that may influence the long run value of your portfolio.
Finally, I have found it useful to have someone that I trust and that I feel is pretty well grounded that I can talk to them about financial markets and economic activity on a regular basis.
You can read the next installment of “Money Moves for Recent Grads” here, and find the entire collection here.
