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 Welcome to the Real World: Financial Advice for College Grads Congratulations, college graduates – especially those of you who have already landed a new job! You’ve just earned a shot at financial independence. Even if you didn’t learn money management in college, you still have time to do your homework and plan for your future. The Price of Independence: A new budget should always accompany any new job. First, calculate all of your monthly fixed expenses – rent, utilities, auto expenses and minimum credit card and student loan payments – as well as your discretionary spending habits. Compare the total to your net income. Next, analyze the possibilities for closing the gap between the two. Debt: Did you accumulate credit card debt on high-rate cards while you were in school? If so, look into transferring the balances to a lower interest card. You may also be carrying the burden of student loans. The good news is that on July 1, 2001, the interest rate on federal Stafford loans dropped from 8.19 percent to 6 percent. This rate will remain in effect through June 30, 2002. You may also be able to reduce your payments if you qualify for the Federal Direct Consolidation Loan program. Although it would lengthen the payment time, it could free up extra cash each month to pay off your high-interest credit card debt. Taxes: Remember you may now file an itemized tax return when completing your taxes that may include deductions like job-hunting expenses, professional association dues, moving expenses related to starting a new job and charitable contributions. If you have moved to another state after graduation, be prepared to file tax returns in each state in which you resided. Finally, try to stash away some money for cash reserves and retirement. When saving up emergency cash, aim for at least three to six months’ worth of living expenses. This is to cover unexpected expenses from job layoffs to auto repairs. You may also want to start saving for a place of your own. Long-term financial objectives, such as retirement, may be difficult to focus on now, but it’s important to start early. Through compounding interest, dollars put away in your twenties and thirties can be worth a lot more than those you saved later. Making it on your own financially may involve issues new to you, so don’t be afraid to get help. Ask your parents or family members for advice, and seek help from a qualified financial advisor in your area. May 30, 2002
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