Congratulations,
2013 graduates. You did it! Now it's time to learn something really
useful.
Having conquered all those classes, now you can move on to mastering the practical skill of managing money. Luckily, the economy is in better shape than it was a couple of years ago, and the overall unemployment rate for college grads is roughly half that of the total U.S. population, boding well for your job prospects.
Having conquered all those classes, now you can move on to mastering the practical skill of managing money. Luckily, the economy is in better shape than it was a couple of years ago, and the overall unemployment rate for college grads is roughly half that of the total U.S. population, boding well for your job prospects.
If
you learn to manage a paycheck, spend less than you earn and stash
away some money for later, you can put that education to good use, no
matter what you choose to do.
Here's some advice to get you on the right path.
Here's some advice to get you on the right path.
Know
your credit report. Employers
might care less about your grades than your credit record, which
shows how well you manage your obligations. So before you apply for a
job or a car loan, go to AnnualCreditReport.com and see what your
credit report looks like. You can check each of the three big credit
bureaus' reports for free once a year.
If you didn't have your own credit card in college or didn't use it, you may not have much of a credit record at all. In that case, a landlord might not lease you an apartment without your parents cosigning. (That's another reason to be nice to them!)
To build a credit record, you should have one or two credit cards and use them at least every couple of months to show you can pay your bills responsibly. Paying student loans on time also will help build a good credit history.
If you didn't have your own credit card in college or didn't use it, you may not have much of a credit record at all. In that case, a landlord might not lease you an apartment without your parents cosigning. (That's another reason to be nice to them!)
To build a credit record, you should have one or two credit cards and use them at least every couple of months to show you can pay your bills responsibly. Paying student loans on time also will help build a good credit history.
Use
your social network. Your
friends are used to sharing information, so take advantage of each
other's knowledge. Don't post your bank balance or salary
online—that's tacky—but don't be shy about asking other recent
grads what they pay for rent, car insurance or Internet service.
Remember what you learned in college: It's good to be friends with
someone who did the homework.
Reduce
debt. An
estimated two-thirds of today's graduates will leave with student
loans, and the average borrower balance is almost $27,000.
Consider
$20,000 in 10-year federal loans at 6.8% interest. The total monthly
payments would be $230, and total interest would add up to about
$7,600 over the loans' life. Paying just $20 a month extra will
shorten the repayment period to nine years and save you $900 in
interest over the life of the loans. Paying a total of $400 a
month—what a car payment might be—will pay off the loans in five
years and save more than $4,000 in interest.
Paying through automatic debits from your bank account could reduce your interest rate by 0.25 percentage point, according to loan servicer Sallie Mae SLM +0.48% . Just make sure you have enough money in your account to cover the payments.
How do you balance all these needs? Stretch your dollars by buying a cheap used car instead of new one. Get a roommate and take your lunch to work. Before committing too much to debt payments, be sure to have at least $1,000 in savings for emergencies—or three months of expenses in the bank if you never want to move home again. If your employer offers a match for a retirement-plan contribution, contribute enough to get at least some of that so you don't pass up free money.
Paying through automatic debits from your bank account could reduce your interest rate by 0.25 percentage point, according to loan servicer Sallie Mae SLM +0.48% . Just make sure you have enough money in your account to cover the payments.
How do you balance all these needs? Stretch your dollars by buying a cheap used car instead of new one. Get a roommate and take your lunch to work. Before committing too much to debt payments, be sure to have at least $1,000 in savings for emergencies—or three months of expenses in the bank if you never want to move home again. If your employer offers a match for a retirement-plan contribution, contribute enough to get at least some of that so you don't pass up free money.
Avoid
unnecessary fees. To
make your budget work, look for free checking accounts at a local
credit union or an online account. Avoid automated-teller-machine
fees and link your savings account to your checking account so that
you'll never pay an overdraft fee. Pay your bills on time to avoid
late fees and in full to avoid interest.
Be
nice to your parents. In
addition to giving you a place to stay until you find a job, they
might pay for your health insurance. If you have insurance under a
student plan, it probably will end in mid-August. If you're not going
to get coverage through a job by then, start working on other plans
right away.
Under the Affordable Care Act, young people can stay on a parent's health-insurance plan through age 25, but they need to re-enroll if they've been on a student plan. After you're hired for a job, it could take three months to qualify for insurance, so a parent's plan or a short-term health plan can be an option. (Short-term plans typically don't cover pre-existing conditions.)
If your parents aren't a fallback, you might need to buy a short-term policy until January, when individuals will be able to buy conventional health insurance through new marketplaces, federal or state-run exchanges that offer standard health-insurance plans from various carriers. Open enrollment begins in October.
Whatever you do, don't skip getting insurance. Even those who are young and healthy need it, since a car accident or unforeseen illness can put you in a giant financial hole.
Under the Affordable Care Act, young people can stay on a parent's health-insurance plan through age 25, but they need to re-enroll if they've been on a student plan. After you're hired for a job, it could take three months to qualify for insurance, so a parent's plan or a short-term health plan can be an option. (Short-term plans typically don't cover pre-existing conditions.)
If your parents aren't a fallback, you might need to buy a short-term policy until January, when individuals will be able to buy conventional health insurance through new marketplaces, federal or state-run exchanges that offer standard health-insurance plans from various carriers. Open enrollment begins in October.
Whatever you do, don't skip getting insurance. Even those who are young and healthy need it, since a car accident or unforeseen illness can put you in a giant financial hole.
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