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A Financial Guide For College Grads Starting Their First Jobs

May 17, 2012 |

May is primetime for graduation season. Across the country, millions of students are receiving their well-earned college degrees, signaling the culmination of almost two decades of education. But how prepared are these young adults to manage their life beyond term papers and office hours? Financial literacy among graduating students is at its lowest levels ever, which is disconcerting when considering the economic environment graduates are entering into. So here are a few pieces of advice, financial and otherwise, to help graduates navigate that next big step.

Establish a budget. If there is one piece of advice to take away from this article, it is creating a balanced budget prior to your first paycheck. Just because your income will soon get a substantial boost, that does not mean you need to adopt a lifestyle to match. You may be able to get away without a budget in college, but now is a great time to amp up your financial planning.

Don't forget your school loans. 25% of students miss their first student loan payment. While economic hardship does contribute to defaults, a larger percentage of students are simply unorganized and unprepared to begin paying back loans. Seek out a financial aid professional for loan exit counseling before leaving school. Some initial preparation and a few extra dollars built into your budget can save you thousands down the line.

Drive across the country. You just finished 4+ years of intense schooling, and you have your entire life to work. Hopefully you have scheduled a few months of freedom and relaxation before you start the rest of your life. While not everyone has the means to travel the world, grab some friends and take a road trip. Adventures can be surprisingly cheap.

Create a five-year plan. Traditionally, the greatest opportunity to increase your salary occurs during your first years out of school. After you have been at your job for a few months, sit down with your manager and develop a five-year development plan. This will not only demonstrate your motivation, but also help direct your career to greater growth in the future.

Calculated Splurges. I was a Sophomore walking to class when a luxury sportscar flew by me on the road. Three years later, I walked into a dealership and bought the same car brand new. While this may not have been the smartest financial decision, it was the right personal decision for me at the time. In my opinion, there is nothing irresponsible about rewarding yourself as long as you are maintaining financial discipline across the rest of your budget.

Avoid excessive debt. We wouldn't be good financial advisors if we didn't include this point. Calculated splurges combined with a balanced budget help to limit excessive spending. While this is a great time to build your credit score, you must be careful not to abuse your newfound borrowing power. Your credit score will determine your eligibility for things like car loans, mortgages, apartment rentals, and even jobs. So keep your FICO score intact by paying off your balance every month.

Drink Water. OK, this may be a bit of my own personal life advice, but I think most problems can be solved by staying well-hydrated. Not only does drinking water help you stay alert, but frequent bathroom breaks keeps you active in the office - and don't forget the financial benefits of the latte factor. Saving $2 a day avoiding that morning coffee will save you $4,000 over five years!


© 2012 Alliant Credit Union. All Rights Reserved.

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