Make It New Grads

Ex-Wall Street titan's 4-step plan to pay off loans and set yourself up for financial success

Sallie Krawcheck
Getty Images | Stephanie Keenan

In honor of graduation season, CNBC Make It is rolling out the speeches and pieces of advice that America's leaders are most excited to share with the Class of 2017. Follow along using the hashtag #MakeItNewGrads.

College students graduate with nearly infinite possibilities in front of them, but too many grads also leave college with a ton of student debt. At the end 2016, outstanding student loans had reached $1.3 trillion.

But whether or not you have loans to pay off, one of the most important things recent graduates and young people can do is "get themselves in financial control," Sallie Krawcheck, former CEO of Merrill Lynch's global wealth management division and founder of Ellevest, tells CNBC.

Sound overwhelming and confusing? It doesn't have to be, according to Krawcheck. The best place to start is with credit card debt or high-interest student loans.

"Your first goal should be to pay that off," says Krawcheck, whose alma mater is UNC Chapel Hill. "This kind of debt is insanely expensive and does nothing for you, except keep you up at night."

Do what you have to do to pay it off: "Live with roommates, rent a smaller apartment, eat ramen," advises Krawcheck. "Get that high-interest debt paid down."

Jay Pharoah on 'Saturday Night Live'
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A second good early goal is to save for an emergency fund — three to six months of living expenses is ideal.

Once all your high-interest-rate loans are paid down and you have an emergency fund, your next goal should be to make investing a habit.

"Set aside a bit of every paycheck for investing, even if it's just one percent," says Krawcheck, who is also former CEO of Citi Wealth Management. "You can work your way up to the holy grail of 20 percent as you make more money in your career.

"Whether it's through an individual retirement account [IRA] you set up on your own, a 401(k) through work or a regular investment account, just invest regularly," she emphasizes.

Why? Because compound interest can be your best friend.

"Since you're young, these recurring deposits will help put the power of compounding to work for you," explains Krawcheck. "That means you earn returns on the money you invest, and you also earn returns on those returns over time.

"And remember," adds Krawcheck, "if you get a raise or a bonus, make it a habit to invest some portion of each of those as well, as a gift to 'Future You.'"

You'll thank your 20-something self one day.

See also: Billionaire investor Chris Sacca's best advice for grads is the same advice he gives himself

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