Tuesday, May 10, 2011

Financial Help for College Grads

According to the Federal Reserve Bank of San Francisco the unemployment rate for college graduates in 2010 was over 8%. According to EPI’s new paper, The Class of 2010, recent college graduates under age 25 the unemployment rate is 9%. Monster.com has a special section on its website for recent college graduates to help them find jobs. USAjobs.com has federal job listings by college major.

According to Pianalto, recent college graduates don’t experience skill and geographic constraints because they tend to be highly educated and mobile. College graduates have suffered worse in this economy than any other group and are having a hard time finding a job. Trying to find employment during a financial crisis can limit total earning potential over the life of a college graduates’ career.

Another factor college graduates have to worry about is the debt accumulated while in school. If they are unable to find a job, they are also unable to pay their debt. When you find a job focus on paying down debt. Here are some financial tips for recent college graduates to help you reduce debt and improve your financial situation.

1. Stay at home for at least a year after graduation. If you have to live on your own buy an efficiency, studio apartment or loft. You can get a roommate but you have no control over whether they pay their rent or pay on time.
2. Your housing costs should be no more than 35% of your total net income (after taxes).

1. Skip the car. Don’t buy a car your first year of employment. Catch public transportation; borrow your parents’ car or a friend’s car when needed. If you must buy a car buy a used car.

Paying Down Student Loans
1. Use caution with consolidation. Consolidating student loans combines your loans into one payment but may or may not provide you with a lower interest rate. You may not be eligible for various student loan forgiveness programs if you consolidate your student loans.
2. Pay more than the minimum monthly payment. Your loan accrues the greatest interest in the first 2-3 years of the loan.

Investing (401K's/IRAs )
1. Start with your company's 401K. Contribute as much as you can to your retirement account. You will need at least 70-80% of your income during retirement and will need a minimum of $1,000,000 to retire.
2. Focus on long term growth. You have to be willing to leave your money untouched for the next 5 to 10 years. Otherwise you won't be able to see the benefits of your money growing.

1. Create a budget. Make your budget flexible to accommodate for unexpected expenses and include savings goals. Include monthly expenses and debt plus your monthly income. This will help to readily see the areas where you can reduce expenses. Create an emergency fund that is enough savings to pay your bills for at least 9 to 12 months.
2. Reduce your credit card debt. Pay more than the minimum monthly payment.

Managing Credit Card Debt
1. Stop spending. Don't spend money you don't have. This will result in your owing more money. Use your credit card for emergencies only.
2. Setup a payment plan. Setup a payment plan with each of your creditors to pay off your debts. Identify any terms and negotiations you would like to make and stick to the terms.

1. Order a copy of your credit reports at annualcreditreport.com and fix any errors.
2. Get current on any delinquent accounts.

Financial Planning
1. Use a broker or financial advisor to setup your retirement account.
2. Buy insurance. Buy health, life, disability insurance.

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