May 17th, 2010
Financial Advice For Graduates That All Of Us Could Use
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Graduates will be walking off their college campuses this spring and right into the “real world,” where national unemployment has inched back up to nearly 10% again, the average college debt upon graduating is $20,000, and our economy’s recovery is still fragile and unstable. In fact, this situation of job uncertainty, heavy debt, and financial insecurity is pretty familiar to most Americans.
This is great financial advice from blogs and articles intended for “the college grad”, but also as relevant to the rest of us and our own financial life.
- Owning individual stocks is gambling—not investing. By buying only one company — Apple because you like your iPhone or Google because you use Gmail — you are essentially playing roulette, no matter how strong the company’s fundamentals may look. The alternative is to invest in index funds, which track broad markets, ranging from the 500 companies that best approximate the overall economy to every single stock in the world. When you own an index fund, the good-performing stocks balance out the bad ones, and you get the market average in return, which provide you with low costs, high tax efficiency, and broad diversification over long term. (Some Financial Lessons For Recent Graduates, MSNBC)
- Start saving for your nest egg NOW. When it comes to retirement saving, the message is simple: Start soon. Contribute to your employer’s 401(k) if there’s a company match and even if there isn’t. Ideally, save 10 percent of your income per year. (5 money lessons for new college graduates, Bankrate.com)
- Clean up your digital footprint. Ever Googled your name before? Four out of five hiring managers say they search applicants’ names online. Social-networking sites like Facebook are likely to pop up first, so it’s important that the profile picture be professional. If unflattering results appear, knock them down the results list by signing up for more social-networking sites like LinkedIn that is geared toward professional networking. (How to Keep Your Grad From Moving Back Home, SmartMoney)
- Your bank account won’t keep up with your social life. It’ll be tempting to spend loads of cash on daily happy hours, dinners, or other events. You can’t avoid a social life in an effort to save money, so find a happy medium. Work out a budget with your new income and decide how much you can spend on entertainment every month; figure out what maximum amount will allow you to save for other things like a vacation, a house, or retirement. (New Grads: Four Money Facts Worth Knowing, Money Under 30)
- Make more than the minimum payment on your credit cards. Credit card companies love customers who don’t pay off their full balances because they end up making years of interest payments without paying off the principal. If someone who owes $3,000 on a credit card that charges 15 percent interest makes only the minimum payment of $70, it will take her 14 years, 5 months to pay off her debt and pay $2,700 in interest over time, for a total payment of $5,706. If she puts an extra $30 to her payment each month, it would only take her 3 years, 2 months to pay it off and the interest payment would only add up to $724. By spending a little bit more each month to pay off her debt, she saves almost $2,000 and pay 1/4 the interest. (Some financial lessons for recent graduates, MSNBC)
- Never stop networking. Even if the lousy economy has you paying bills with barista tips, stay active in your chosen field through volunteering, internships, or pro bono projects. A recent survey by job-hunting site Monster.com shows that companies rank word-of-mouth as the most effective recruiting method. (How to Keep Your Grad From Moving Back Home, SmartMoney)
- Protect your credit score. Bad credit make it difficult to get a good job or approval for an apartment lease. Employers and leasing offices run credit check. Paying bills on time is one key way to protect a credit score. Set up automatic payment for regular expenses like the phone and electric bill. (5 money lessons for new college graduates, Bankrate.com)
- Mistake: Believing that learning is over. After college is where the actual learning takes places. If you’re not reading at least a book a week and reading industry research papers, you’re falling behind someone who is. (14 Dumb Mistakes That College Graduates Make, Gen Y Wealth)
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