Money Advice for My Sister, the Graduate

For new grads, getting organized is step number one.


As my sister gets ready to graduate from medical school next week, she keeps sending me her money questions. Should she try to pay off her massive student loans or save for retirement? Would it be better to save money in a bank account or a Roth IRA? Should she get her credit report, and what’s the best way to make a budget?

[In Pictures: 10 Smart Ways to Improve Your Budget.]

Her questions inspired my story this week on the top money mistakes that college graduates make. They include taking on too much debt (or not enough), spending a lot on lifestyle upgrades, and waiting to start saving and investing. After warning my sister about those common errors, I also made a list of the things she should do. (It wasn’t the first time; see Money Tips for Young Doctors.)

Step one, I told her, was getting organized. When she came over to talk about money, she brought a three-ring binder full of paperwork on her student loans, credit cards, and other accounts. I suggested that she put more of that online, so she had less to carry around and sort through. Most banks let customers put almost everything online, which eliminates the need for paper statements (and filing). Since she’s about to move across the country, the less stuff she has to carry, the better.

She created an account at and uploaded her various accounts so she could start tracking her spending more easily. The free website also lets users set up specific savings goals and create alerts when spending in one category gets too high. “It’s amazing to have everything in one place, and to track my expenses and get updates,” she says. Many banks also offer free online tools through their own websites.

Second, I suggested that she get her school to do some work for her. She was missing key information about some of her student loans, including who owned them and what the interest rates were (and how those rates might change over time). A meeting with the financial aid office of her school could help sort all that out. Once she understood the details, she could then come up with a plan for paying off those loans, starting with the most expensive, or arrange to consolidate them. (She doesn’t have any credit card debt, but if she did, paying it off would have been the top priority.) [See The Best Credit Cards for New College Grads.]

Her future employer also owed her some information. She wasn’t yet sure about her health insurance options, retirement benefits, or other essential non-salary benefits. These benefits can be worth a lot; she didn’t want to overlook them.

While many new grads can negotiate their salaries themselves, people in more regimented healthcare professions like my sister, or other jobs where pay grade is usually determined by a formula and is the same for everyone, don’t have that option. There’s still room to be savvy, though. New employees can make sure to take advantage of all benefits available, including health insurance, tax-advantaged retirement accounts, flex spending plans, and anything else the human resources office offers.

Third, she needed savings goals. Sure, she knew that she wanted to save for retirement at some point, but how should that goal fit in with her other savings goals, such as creating an emergency fund and saving for travel and other goals? There’s no right answer here, but I suggested that she open a retirement account right away if her employer offers one as a benefit, especially if it matches any contributions. But instead of maxing out on retirement savings, she should balance that with the need to set up an emergency fund account.

After putting three months' worth of expenses into that account, she could decide to put more into the retirement account or save more for other goals, including international travel. In the next five to 10 years, she’ll also probably experience some major life events, including buying a home and starting a family. Padding her bank account now will help make those events more joyful—and less stressful.

As for where she should keep those savings, I suggested putting most of her retirement funds into index funds that mirror the stock market, since she has so much time before retirement, and then keeping her more immediate savings in a low-risk savings account. Interest rates are low, sure, but if you need the money soon, you don’t want to risk losing it. After accumulating that emergency fund, then she might want to consider shifting some of those longer term savings into more aggressive investments.

Lastly, I told her she should check her free credit report at, just to make sure there was nothing on there that would raise any red flags. If she buys a house in near future, she doesn’t want to be surprised by problems when she’s shopping for a mortgage.

My sister actually took most of my advice. In addition to signing up for, she spoke with her financial aid office and got all her questions answered. Soon after moving to her new city, she plans to ask her new employer, a big university hospital, about the retirement benefits. And when she pulled her credit report, she noticed a strange address, so she had it removed.

And now that she’s a doctor, she’s promised to answer all my pressing medical questions in return. I think I’m definitely the one who comes out ahead in that exchange.

Kimberly Palmer (@alphaconsumer) is the author of the new book Generation Earn: The Young Professional's Guide to Spending, Investing, and Giving Back.