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Grads: Get off on the right financial foot
DENVER (5/13/14)--You'll be a college grad in just a few days. As you say goodbye to all-nighters spent studying, say hello to some new spending habits. Decisions you make today can affect your finances for the rest of your life ( May 5).
Here's some advice to set you off on the right path:
Stay frugal. If you already landed a job, this might be the first time in your life that you'll be earning a regular paycheck. It's tempting to go on a spending spree. Treating yourself to a few things is fine, but stay mindful of what you're spending. Check with your gym, and cellphone and cable providers, to make sure you're getting the best rates. Pack lunches from home. Have friends over for dinner and movies instead of going out.
Negotiate your pay. When you get your first job offer you don't have to agree to the salary. The implications of taking less money than you're able to negotiate have long-term effects. Raises often are based on what you're already making, so starting out with a higher salary will mean higher earnings over the course of your career.
Build an emergency fund. You could lose your job or face another financial emergency at any time. Prepare for the unexpected by setting up an emergency savings account. Have your paycheck directly deposited to your credit union checking account and set up automatic transfers into that savings account. Experts advise trying to save three to six months of living expenses. Setbacks, such as a couple-thousand dollar car repair, can cause someone without savings to borrow from retirement accounts--not a good plan.
Start saving for retirement now. Many employers offer 401(k)s or similar retirement savings accounts. If your employer offers to match a percentage of your contributions, take advantage. If you don't, you're leaving money on the table. Consider opening a Roth individual retirement account at your credit union as well.
Pay down student loan debt. In 2012, 71% of graduates had student loan debt, with the average graduate owing almost $30,000 according to the Institute for College Access & Success, Washington, D.C. Know student loan details, save all correspondence about loans, and contact your lender immediately--before the due date--if you're going to miss a payment. If you're able to, pay extra toward your loan to save on interest and pay it off sooner.
Use credit appropriately.  It's important to establish credit in your own name to develop a credit history. A strong credit history will pay off in the future when you want to buy a house or purchase other big-ticket items. It even can affect your ability to get a job or rent a place to live. Don't charge more than you can afford to pay off monthly, and always pay your bill on time. Consider getting a secured credit card to help build or rebuild credit. A secured credit card trades access to credit for your commitment to keep a certain amount of money in a savings account. Once you've made, say, 12 months or so of on-time credit card payments, you'll be eligible to apply for a conventional credit card.
For related information, read "Go Cold Turkey on Consuming Addiction" in the Home & Family Finance Resource Center.

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