PERSONAL FINANCE: Financial Advice for Grads

By Tonya Miller

Unfortunately, most graduates aren’t adequately prepared to steer their own financial futures.

One study found that the average U.S. college student could only answer about a third of the survey’s basic financial questions. More than 75% in another report said they wish they’d had more help in getting ready to take on their own money management.

But college is actually the best time to get a firmer grasp on your finances, because you’re still living part-time under the umbrella of a parent or guardian’s protection. You can slowly assume more and more responsibilities, while taking advantage of their years of experience in balancing expenses with income. Emerging from school with a solid credit history and manageable debt is all the more important considering the low pay associated with most entry-level jobs, even for degreed candidates. Here’s how to get started.

TAKE RESPONSIBILITY

The average senior graduates with thousands of dollars in credit-card debt, putting themselves in an early financial hole. Try to keep from needlessly running up these bills, but if you do, focus on paying them down as quickly as possible. Interest typically adds up very quickly.  Once you’re able, consider automating your savings: Whether through a regular draft to your savings account or a 401K deduction, putting money away as you’re paid makes it more likely to stay saved instead of being spent on easily forgotten daily things.

TRACK EXPENSES

Create a budget so that you know exactly what’s coming in, and what’s supposed to be going out — and to where. For many, a student loan is often the most immediate expense upon graduation. Try to begin payments before the usual grace period ends, and keep up with this bill. If you go into default, the loan’s entire unpaid balance and any owed interest can become due immediately. Start with this important bill, and continue detailing every outgoing expense. Whatever’s left is the cash you’ll have for incidentals.

DON’T CUT TOO DEEPLY

Your post-graduation cost-cutting zeal must be balanced by real-world considerations. If you’re no longer on your parents’ health insurance, for instance, the risk of financial ruin skyrockets should the unthinkable happen.

While it’s true that most young adults “never get sick,” unplanned mishaps like car accidents and sudden illness are a part of everyday life. Paying a small monthly premium ensures that you don’t add insult to injury by going bankrupt after walking out of an emergency room.