Bankrate experts: One financial lesson we wish we knew after graduating college

In the shuffle of immediate priorities, saving and planning for retirement isn’t a walk in the park. We all know we need to save for the future, but many people don’t know how much they’ll need to comfortably retire.

That’s exactly how I felt during my first year after college. While I was lucky enough to work for a company that offered a 401(k) plan, I had no idea how much I should be contributing or what to invest in. So I did what a lot of people do: I contributed the bare minimum and put it off. It was only in 2019, when I checked my 401(k) balance, that I realized that I needed to clean my act up and learn about saving for retirement if I ever wanted to step away from my 9 to 5 in my later years.

I wish I would’ve known to use my credit card sooner and take advantage of student card perks. I was afraid of my credit card when I first opened it as a sophomore in college. My fear of the card stemmed from the negative experiences my mom had as a first-generation credit user. Since I didn’t start using my card regularly until after I’d graduated, I missed out on solid perks like a brief zero percent intro offer and annual good grade credits.

Since learning how credit cards work, I now see how helpful they can be if you know how to use them correctly. So, don’t be afraid of a credit card. Start by learning what a credit score is and how credit card use can affect your score. Read up on credit card information, terms and conditions so you’re armed with the right knowledge to ensure your credit card is an effective financial tool in your arsenal.

There are many resources, tips and tools offered to post-graduates that can help you pay down your student loan balance. Knowing what they are and how to take advantage of them are the keys to becoming student loan debt-free.

To best set yourself up for post-graduation financial success, craft a repayment plan that fits comfortably within your monthly budget. To do this you’ll need to know the ins and outs of your balance, including the total principal loan amount, the interest rate and the loan term for each of your loans. From there you can input these details into a student loan calculator, which will give you your expected monthly payment plus the total amount of interest you’ll pay over the life of the loan.

Upon graduating, I wish I’d told myself that the best way to leverage my excellent savings ability is to invest in an S&P 500 index fund and just keep adding to it monthly. Buying that index fund and adding to it regularly are two elements of investing — the “what” and the “how” — that lead to great returns over time.

The third element is controlling your temperament when you see the market decline. It’s absolutely crucial to think long-term and to think of a decline in the market as a long-term opportunity to buy at a discount. You don’t win at investing by making a quick score; you win by investing for the long term and thinking long-term. Not only does buying and holding an S&P 500 ETF beat almost all investors over a multi-year period, it’s also tax-advantaged and you won’t be taxed on your capital gains until you sell the fund.

What would I tell my (much) younger self about how to approach my personal finances? First, it would be a broader bit of encouragement to let me know that so many things would work out just fine over time. Not everything, but most of the important things.

The one big thing that I might have done differently with personal finances would be to invest much earlier. This wouldn’t have been to try to pick a remarkable individual stock. I would guide my younger self to opt for an index fund, like one tracking the benchmark S&P 500.

Realistically, I didn’t have much disposable income (or much income at all) early in my career. But it would have been nice to piggyback the steady advance of the stock market going back over those many decades. Investing for the long term is really the only way to go.

After graduation I wish I knew about the importance of having an emergency fund. And I wish I knew how a split-deposit — having part of your direct deposit go directly into a savings account — could help me automate the process of establishing and adding to this fund.

I also wish I was more aware of the real effect of inflation eroding purchasing power and how having an account that earns a competitive annual percentage yield (APY) can help you try to keep up with inflation.

Additionally, I missed out on a lot of years of interest by not opening a savings account at an FDIC-insured online bank sooner. Having a savings account at an FDIC-insured online bank — separate from the bank you have your checking account at — is the best of both worlds because it’s separate enough so I don’t look at the balance every day. And mentally, I know it’s not for paying bills or for a vacation.

If you started earning money early on, like myself with a part-time job flipping burgers at 16, opening a Roth IRA and aiming to maximize contributions is the best move you can do. By doing so, you are setting yourself up with a strong foundation for your retirement savings and capitalizing on the potential benefits of tax-free growth.

With a Roth IRA, contributions are made using after-tax dollars, meaning you already paid taxes on the money. When you reach retirement age, the earnings and growth in your Roth can be withdrawn tax-free. Starting to invest at a young age, especially in your teenage years, allows your investments to grow and compound over time, which could lead you to substantial gains in the long run. However, there’s one mistake that many investors do that can hurt their portfolios in the long run which is not selecting investments within your Roth IRA.

In personal finance, as in many areas of life, slow and steady wins the race. Set small goals, stay the course and you may find yourself in a better position than you’d thought possible.

Credit cards are a great example. An 800 credit score or a fancy platinum card loaded with perks may feel out of reach, but you can get there if you keep things simple and stick to a plan.

If you need to build credit, start with a no-annual-fee secured card and use it only for small purchases you can easily pay off each month. Keep that up for a few months and you should see your credit score improve and more card options open up for you.

I evangelize my high-yield savings account. But I do it in earnest — mostly because I wish I would’ve known about the only guaranteed “free lunch” of finance when I first finished school.

The year was 2018. I had just started my first job, and I was still banking with my hometown’s only brick-and-mortar bank despite now living about 800 miles away. I’m just another poster child for why people tend to stick with the same bank for so long (17 years in our latest survey data!). I knew just about everyone who worked there. It felt like a family establishment for my small town, and the relationship was personal. Still, what mattered most was my savings yield, and it was a dismal 0.01 percent annually.

Roughly half of credit cardholders carry debt from month to month, while the other half (more or less) pays their bills in full and avoids interest. There’s a tremendous difference. The average credit card rate is over 20 percent — a record high. It’s really hard to build wealth if you’re paying a hefty rate like that, month after month. If you only make minimum payments toward the average credit card balance at the average interest rate, you’ll be in debt for more than 17 years.

On the flip side, paying your credit card bills in full means that your cards are working for you. This allows you to take tremendous advantage of lucrative rewards programs, convenience and other buyer protections ranging from travel insurance to dispute resolution, extended warranties, purchase protection and more. Free flights, free hotel stays, extra cash back in your pocket … it’s all possible.