Financial struggles upon graduation
By Rachel Lundy
The time has come for many to graduate from universities across the nation, in anticipation of what is to come. As employment is secured, financial plans are soon to follow. With a multitude of decisions to be made, young employees, new to the workforce, can soon be overwhelmed with the “real world” and its pressures of investing and saving for retirement immediately upon graduating. Earning entry salaries, as many do, these decisions may be difficult when deciding what is imperative, and figuring in what order to proceed.
A common phrase, “It takes money to make money,” does ring true upon graduating. There are initial expenses that must be made when looking for a job, such as buying a suit for interviews; however, one must keep these purchases to a minimum.
“Diminish your expectations,” said Tamara Draut, author of “Strapped.” Draut suggests exercising discipline and making sacrifices in order to save more initially. As recommended for saving money, pack a lunch for work, forego the Iced Mocha Latte and consider living with your parents, initially.
With these savings, it is suggested by Dave Ramsey, author of “The Total Money Makeover,” that individuals save an emergency fund of $1,000. Once an emergency fund is in place Ramsey suggests that debtors begin paying off debt.
Pay off credit card debt first, beginning with those that charge the highest interest rates.
“Don’t worry about student loan debt too much, unless it’s dominated by high-interest private loans,” said Liz Pulliam Weston, author of “Easy Money.”
“As long as most of it is locked in at lower rates, 20-somethings are better off putting their extra cash into high-yield savings accounts or retirement savings,” states U. S. News & World Report.
There are other factors outside of finances that must be considered as well, which will, in turn, affect one’s budget. Health insurance is a necessity that one should never go without, as pre-existing conditions begin to exist after a 63 day lapse in coverage. As a new employee, one should either choose a plan offered by your employer or find an individual plan with a private agent. It is imperative that all graduates take the time to make these considerations.
While considering all of these things, graduates must also make retirement decisions, even at this early age. Employees should meet with their Human Resource Departments to discuss the retirement options offered. A consideration may be to open one’s own individual retirement account (IRA), either Traditional or Roth, in addition to what the employer’s are offering.
Suze Orman, CNBC’s financial advisor, has these suggestions for the financially secure to practice. “Buy a home you can call your own,” said Suze Orman during an interview on the Today Show. “There will never be a better tax write-off than a home. Next, contribute into your company's 401k if the company matches their contribution, but only up to the point of the match. Finally, contribute to a Roth IRA (if you qualify), or a nondeductible IRA if you don't qualify for the Roth, so you can take advantage of the Roth conversion possibility in 2010. However, before putting money toward any of the investments above, you MUST pay off any and all credit card debt you have. Getting out of debt is the most important priority before investing for retirement.”
Graduates have numerous decisions to make after receiving their degrees, as many are getting ready to do this coming May. As boring as it may seem, it is important to take time to consider each of these financial issues. Plan ahead and save as much as possible to secure your future.
Originally Published: Issue 647 - May 7, 2008
 |
Share on Facebook |
