Business Leaders Offer Wisdom to Graduates

Financial Advice for Graduates

The time you've waited for has arrived. You're a graduate, you've hopefully found a job and you're on the verge of exercising newly gained independence.

The financial responsibilities ahead can be daunting. You will probably have to pay bills, purchase essentials such as food, and save for a house.

In the meantime, if you are like many graduates, you may have to start paying down student loans, take on new debt and deal with credit cards.
On the other hand, time is on your side. One of your biggest assets as you work toward setting and achieving financial goals is the value of compound growth over several decades.

The financial decisions you make now involving spending, saving and budgeting can mean the difference between struggling for the rest of your life or building toward solid financial freedom.

Here's a checklist of some of the important issues you will confront, along with tips on how to maximize the money you have available to retain and reinforce your security.

	A Place to Live
	Can you afford the place you want? Rule of thumb: Roughly one-third of your net monthly take home pay should be used to finance the place you live. Whether it's a penthouse, small house or apartment depends on many factors. Some rental properties include the cost of utilities such as electric, heat/air conditioning, water and sewer. There are other factors to consider. If your starting income is modest, you will likely pay a higher percentage for housing. Where you live is the biggest single factor in the amount you pay for rent. The cost of a studio in a big city could potentially get you a huge place out in the country. Your location is tied to many variables such as job, family and personal preference. Could you pay less by living with a roommate, which would leave extra money for other things?
	Have you factored in the cost of other "utilities" such as your phone (land line, cell or smart phone with various packages), cable TV, Internet access and furniture?
	Do you have renter's insurance to cover your personal belongings in the event of a theft, fire, flood or other disaster? Landlords' insurance is unlikely to cover your goods. What do you need to insure and which items could you simply replace out of pocket?
	Have you read the lease carefully and does it fit into your plans? You don't want to sign a two-year lease if you plan to move again in less than that time. A lease is a legal document so understand all the terms.
	Have you pondered buying a condo, townhouse or single-family home if you are one of the fortunate high-earning graduates? The sooner you purchase, the quicker you start building equity and claiming the tax benefits that come with home ownership.
	Saving and Budgeting
	Are you setting aside money from each paycheck? Once you target the amount you want to save regularly, pay yourself first. In other words, put a specified amount away before paying anything else. That way, you won't think of the money as disposable income and you won't miss it.
	Have you saved enough to cover unexpected expenses? Set enough money aside to cover car repairs or even a job layoff.
	Credit and Debt
	Do you read the fine print? When signing credit card or loan contracts, don't gloss over the details. Will the interest rates change after an introductory period? Can you get out of the contract? How much is the penalty if you make a late payment?
	Have you arranged a student loan repayment plan?  After graduation, there is a grace period before you must start paying back student loans. Although payments are not required during this stage, interest will accumulate.
	Do you need a car loan?  First, check your credit. If it's not stellar, consider a co-signer. Then, shop around for loan rates at your bank, credit union and car dealership. (You'll also need to shop around for insurance.)
	Is a new car essential? Purchasing a brand new car can keep you on a tight budget for years. Consider a slightly used vehicle, which can save you a bundle. You can get a car that looks like new for a lot less. Also, don't let a car sales person get away with emphasizing just the monthly payments. Instead, negotiate based on the overall cost.
	Health and Life Insurance
	Are you covered by health insurance? If you don't have a job with coverage, check to see when your parents' policy stops covering you. (The healthcare reform law may allow you to stay on your parents' policy for a few years.) If necessary, look into a short-term or high deductible policy.
	Do you understand your insurance coverage, protection and deductibles?
	Have you considered life insurance? If you obtain life insurance when you're young and healthy, the rates are generally less expensive. Depending on your need to insure later in life, as well as health issues that can creep up over time, the cost could rise significantly in the future.
	Retirement
	Have you thought about saving for retirement or have you started contributing to a tax-favored account? Retirement is a long way off. However, by saving even small amounts when you're young, you can amass a large nest egg because your contributions have more time to compound. Plus, contributions save money in taxes. Even better, you may be able to borrow from a 401(k) account or take money from an IRA, without paying an early withdrawal penalty, for several reasons, including the purchase of a first home.
	If you contribute to a 401(k) plan at work, does your employer make "matching contributions?" This means the employer adds in a percentage, say 25 percent or 50 percent, of every dollar you contribute.
	Do you know the basics of investing? It's a good time to learn about the stock market.As you begin the road to financial independence, use your young age, education, and earning capacity to build wealth and reach your goals.

Start establishing relationships with tax, business and legal advisers. It's not too soon to begin working with trusted advisers. During your career, you'll likely need help from experienced advisers who can assist you as your needs grow. By initiating these relationships now, you'll know who to contact for help with business, financial and legal matters.