The word "credit card" is an automatic cha-ching for college students, but when you're getting ready to graduate, you know a little bit more about the dangers of credit card use.
But there are good aspects to having a credit card. Namely, it helps you build credit. If you dream of owning a home, or even getting a car, a good credit score is a must-have. (My score wasn't always so hot, I'll admit.)
Check out this post, 5 Best Credit Cards for College Grads at CardRatings.com. It has some practical advice on how to use and benefit from credit cards.
Even if you leave college with a not-so-great score, getting one of these may help you improve your credit so you can leverage it for all you want in life.
According to a survey conducted by Adecco Staffing US, college graduates lack confidence in their future retirements. The survey found that only 19 percent of participants believe Social Security will exist when they retire and only 46 percent had confidence that their personal savings plan will be able to fund their retirement lifestyle.
If you lack faith in your own personal savings plan, here are five ideas to help you get the right start after college.
[See the best personal finance stories from around the Web at the U.S. News My Money blog.]
1. Open a company-sponsored 401(k)
Perhaps the best investment option is your company’s 401(k). Many young professionals make the mistake of not contributing to the retirement plan offered through their job and they are missing out. Many companies offer “safe harbor” and matching programs. These programs are essentially like receiving free money. A safe harbor contribution means the funds paid by your company are automatically 100 percent vested at time of contribution; even if you choose to leave your company a month later, the funds stay with you. A match program is when the company matches the amount you contribute to your 401(k).
Many companies will do this for up to a specific percentage. If you are unsure about the details of your company’s retirement plan, take time to meet with your HR department to get the full details. The earlier you start participating, the better shape you will be at retirement.
If you are having a hard time finding from in your budget, consider this tip provided by the Securities Exchange Commission in their “Saving and Investing for Students” booklet: “If you buy a bottle of soda every day for $2.00, that adds up to $730.00 a year. If you saved that $730.00 for just one year, and put it into a savings account or investment that earns 5 percent a year, it would grow to $931.69 after 5 years, and grow to $3,155.02 after 30 years.”
2. If a 401(k) isn't available, open a Roth IRA
Some companies do not offer a 401K plan as an employee benefit. This shouldn’t be an excuse for you not to save for retirement. Open and contribute toward an IRA instead.
As reported by Liz Pulliam Weston on MSN.com, if you invest $3,000 in an IRA annually from age 22 to 32, and then stop saving altogether, your IRA could grow to more than $550,000 by the time you’re 65 (this is assuming an average 8 percent annual return). However, if you put off saving during those first 10 years out of college and start making $3,000 contributions annually from 32 to 65, your IRA would grow to only $437,000.
3. Consider a government consolidation loan
The College Board estimates in each school year from 2000 to 2007, 60 percent of bachelor’s degree recipients had to borrow funds to pay for their education; and the average debt per student increased nearly 17 percent, growing from $10,600 to $12,400 in the same time period. If you are one of the students who utilized student loans to help cover college costs, a government consolidation loan may be a smart financial move. With a consolidation loan, you are able to bundle all of your federal student loans into one monthly payment. Often, your rate will be lower than the average weighted rate of your existing loans. When you consolidate, your monthly payments may also decrease. By owing less interest and having a lower monthly payment, you are able to put more money away into savings. You can route these savings into an emergency account to help cover your monthly expenses should something happen to your job.
4. Minimize credit card debt
If you acquired a student credit card while in college, it’s time to graduate to a low-rate card. As reported by Liz Pulliam Weston in a recent MSN.com article, the average college student now graduates with more than $20,000 of debt, while the average starting salary is $30,000. Credit card debt is a large chunk of that owed by college grads, as found by Sallie Mae. Sallie Mae reports that undergraduates are now carrying a record amount in credit card balances—$3,173 on average.
“You’ll see huge savings by transferring your balance from a high-rate student credit card,” says Charles Tran, research director of the consumer credit card comparison site CreditDonkey. “For example, if you have a student credit card with a 23 percent APR and a $3,173 balance, you will pay $2,783 in interest and will take 13 years to pay off the balance when making the minimum payments.
By simply transferring that balance to a low rate card with an 11 percent APR, you will save $1,878 in interest and it will shave almost four years off your payment schedule,” explains Tran. You don’t have to stick with the minimum monthly payments when reducing your credit card debt. Even if it means decreasing the amount you are putting into savings—after all, what’s the point of stashing away an extra $100 into a savings account that gives your 2 percent interest or less when you’re paying much more on your debt?
5. Invest in yourself
Often, we focus on purely financial investments and forget to continue investing in ourselves when we earn our college degree. However, making a small investment in ourselves can lead to a large increase in future income potential. Take the time to find career development opportunities through the form of webinars, workshops, extension courses and certification programs. Also, don’t forget the value of trade organizations and a professional wardrobe.
By making the small time and financial investment in yourself, you will find yourself facing additional promotions and job opportunities that will lead to higher pay at a quicker rate than other professionals who only focus on their career while at work.
Chad Fisher spends his time building and promoting websites for people to learn more about affordable housing and has developed a free site for consumers to compare auto insurance quotes from providers in their state.
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