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8 Great Knowledge Morsels for New College Grads

Carrying a boatload of knowledge and debt new graduates enter a mixed world with the lowest unemployment rate in 16 years but filled with overall uncertainty. Nevertheless, going forward money management is most critical as young adults embark on their next lifecycle. 

The Freedom Financial Network recommends graduates offers these eight great tips:

1.    Benefit from today’s low unemployment rate. Good news for today’s grads: The unemployment rate for people ages 16 and up was just 4.3% in May. That is the lowest the rate has been in more than 16 years, according to the Bureau of Labor Statistics. Even if the first job is not exactly what they were seeking, graduates are likely to find some employment. They can gain experience and a paycheck while continuing to seek out their dream jobs.

2.    Create a budget. A budget is a spending plan, based on income, lifestyle and goals. Grads should begin by tallying all set monthly expenses – including housing, utilities, student loans, car payments and any credit card debt – and variable expenses, such as groceries, gas and clothing. The total will help set a target for monthly income and savings.

3.    Use credit cards wisely. Younger millennials (age 18-24) have fewer credit cards, and use them less than any other generation. In fact, just 67% of young millennials use credit cards at all. However, most adults need one credit card for personal business and to help build a credit history. Grads who have any credit card debt should aim to pay it off before student loan payments begin.

4.    Take charge of student loans. Most student loans have a six-month grace period after graduation before regular payments begin. Graduates can check into loan repayment options, such as profession-based programs. Teachers or public servants may qualify for loan forgiveness. Some people qualify for income-based repayment plans. Those who suspect they might have trouble making payments should ask their lender about alternative arrangements.

5.    Pay on time. On-time payments are the single most important way build and protect a credit rating. They account for more than one-third of a person’s credit score.

6.    Build an emergency fund. Deposit graduation money in a savings account dedicated to an emergency fund. Then, contribute 10% – or as much as possible – to the account from each paycheck. Build this fund to cover six to nine months of basic living expenses, although most new grads will find that even a few hundred dollars saved will go a long way toward covering an unexpected job loss, sudden car repair or a rental deposit.

7.    Save for retirement. Everyone should enroll in an employer’s retirement plan or open an individual retirement account (IRA). Saving $100 per month, growing at an annual rate of 6.5 percent, would amount to more than $320,000 over 45 years. Anytime income increases, raise the savings amount.

8.    Get health coverage. At this writing, the Affordable Care Act remains in place, which means that health insurance policies are available to policyholders’ adult children until they turn 26. This provision can make it more affordable for young adults who do not have insurance offered through their employers to maintain health insurance. In addition, current law imposes a fine – paid when filing annual tax returns – for anyone who does not have health insurance.

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