Money Talk: Part 1
DUBUQUE – For recent graduates who have never taken a financing class, knowing how to file your taxes, paying your student loans and starting a 401(K) can all be a bit overwhelming. That is, unless you are Sarah Link.
“Any money I came into, like when I got a bonus at work, I immediately put it into student loans but kept some for savings and a little bit to treat myself,” Sarah Link, recent graduate from Loras College, explains.
It sounds like Sarah has got it all figured out. She saved, established credit and filed her taxes on time. Although she filed on time, deciding if she should file under her parents for another year or not was a new step in the process.
“For the first half of the year I was a student. I graduated in May and then I started working a week after graduation. So it was kind of this even split.”
Dr. Eller, Associate Professor of Finance at Loras College, suggests that students talk with their parents about who will claim them at this in-between stage.
“Talking with your parents about that whole idea about who will claim you on the taxes, that is likely to change, right as you’re going out into the world,” he states.
Your parents claiming you at this stage may not make much of a difference on your tax return because you do not have a house, spouse, or kids. Thinking ahead, Dr. Eller suggests that students keep a few things in mind.
“The other big thing to remember is when you start paying those student loans you have, that interest is deductible for you,” he says.
To keep track of payments on students loans, look out for a document in the mail from your loan lender around tax time.
Dr. Eller also suggests, “Keep track of things. You need to keep receipts of things, especially if you are making any sorts of charitable donations.”
When you get a new job, think twice about the taxes you have deducted from your paycheck.
“There’s a temptation to have them withhold a lot of money so you get a big type of refund in April, but remember what you’re essentially doing is providing an interest free loan to the government,” he explains.
To be safe, when you first fill out the form when starting a new job, write in a “zero” for your deductions, just to be safe. If you end up getting a lot of money back after filing your taxes, you may want to consider adjusting your deductions.
Lastly, always keep your taxes on file. Dr. Eller says that you should save up to seven years.
Follow these tips, and when you graduate college you too will be financially savvy, just like Sarah.