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Financial Sense 301: Making it in The Real World

College-related debt is increasing and millenials are facing difficult choices about their finances and their futures. The good news is that millenials also have more options than ever before; the job market is ever changing, technology is improving by the minute, and information is right at our fingertips.
02/06/2015 10:35pm ET | Updated April 8, 2015
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People used to believe that a college education was the ticket to getting a good job straight out of school and would help you meet all of your financial obligations. Most experts agree college is still worth the investment for the majority of students.

Today, many college grads are faced with mounting debt, diminishing employment opportunities and the stress of figuring out how to plan for the future. After graduation, it's exciting to enter the "real" world -- but it can also be very stressful. Thirty percent of income goes towards debt repayment for those between the ages of 18-24.

Vicki Feggilus, a 2013 graduate of Utica College says, "My financial future does scare me. I feel stuck. As expenses ramp up (loans, phone bills, health costs, transit), I do feel like my loans weigh me down. I can't see myself ever [being able to] afford a car (and car insurance and gas) or rent, along with all the other expenses I have now."

These hardships are forcing many recent grads to make difficult choices about their finances and how they plan to pay off their debt. A Gallup poll conducted from Aug. 7 through Dec. 29, 2013 found that 14 percent of those aged 24-34 are living with their parents. Twenty-eight percent of those are college graduates. Additionally, college graduates are accepting positions they might be overqualified for or that don't necessarily make the best use of their degree.

The news is not all bad, however. The average starting salary for 2013 graduates with a bachelor's degrees is $45,000 and job opportunities are increasing as baby boomers retire. Graduating college and moving into the real world is the perfect time to implement good money management that will lay the foundation for a healthy financial future.

Set a Budget

Once you have graduated and begin looking for -- or starting -- your career, you need a plan for managing your finances.

Be sure you know when you have to start making payments on any student loans and what your monthly payments will be. You may want to consider consolidating loans, not only to get a better rate, but also for ease of repayment. Paying off your debt should be a top priority.

Chenell Tull, a 2009 college graduate, has recently begun paying off her student loans of more than $60,000. She plans to pay off her student loans within 36 months and vows to never go into debt again. "I am sure to make payments on time and I make extra payments when I can. It is a heavy burden to be under so much debt, but it is possible to make strides, you just have to be smart about your spending."

Recent grads should create a budget, factoring in all bills and expenses. If their income isn't enough to meet their needs, they can start identifying areas to cut back. In fact, Sean Moore, Certified Financial Planner for SMART College Funding, recommends that recent grads continue living like a college student for as long as they can. Buy generic products, eat cheaply, find inexpensive entertainment, etc.

Setting money aside for an emergency fund should also be a top priority. Dan McElwee, Executive Vice President and Wealth Manager at Ventura Wealth Management says, "It is incredibly important for young people to begin putting funds aside for a 'rainy day.' Job losses and unexpected expenses happen. It's much easier to pull necessary funds from an emergency account than going back to the Bank of Mom and Dad."

Monitor Your Debt

As recent grads make their way into the real world, it's tempting to start enjoying some of that hard-earned salary on something more exciting than student loans, but Moore cautions against making big purchases right away. Don't jump into a lease, mortgage, or buy a new car. Recent grads should consider moving in with their parents or finding inexpensive housing and driving their old vehicle until they're established.

Don't open new credit cards or loan accounts to pay for things that aren't an absolute necessity. This will only add to your financial obligations and make any outstanding debt that you're already paying more burdensome.

There are great resources available for students with large amounts of debt. Students should take full advantage of free student loan information available online from trusted U.S. government agencies and resources.

U.S. Government Agencies:

StudentLoanHero.com

StudentLoanHero.com was started by a student, Andy Josuweit, who had more than $100,000 in debt thanks to his student loans. Post-graduation he found himself juggling 16 different loans serviced by four separate companies, which quickly became a real nightmare for him to keep track of. During this process, he enlisted help from various experts, such as attorneys well-versed in student loan rules and regulations.

Studentloanhero.com is an online service that can help determine the best strategy for managing loans, refinancing loans if necessary, and repaying them in the fastest and most cost-effective way possible.

Site users can:

  • Sync, organize and track private and federal student loans in one centralized location.
  • Gain an in-depth student loan summary and financial analysis.
  • Learn financial strategies to lower the total interest accrued.
  • Find advice on Federal and Private loan repayment programs and options.

Ready for Zero

Readyforzero.com is another great website that offers their services for free, in addition to paid account options. ReadyForZero is designed for all consumers with debt, regardless of whether or not you have student loans.

Site users can:

  • Link all accounts to visualize and track progress.
  • Create a personalized payment plan.
  • Set up reminders and notifications and set due dates.
  • Access their account on any mobile device through their app.

Communication is Key to Success

As you begin making payments on your loans, chances are that you or your loan provider will need to communicate. Be sure to follow their tips to ensure that you can get answers to your questions and remain in good standing.

If it's hard for your lenders to contact you, they certainly aren't going to bend over backwards to make sure their information is updated. Always stay in touch with your student loan providers anytime you move, change your phone number, or change your email address.

Many students have complained that they've made payments on the due date or mailed in a check to apply to their account, but the payment was never received, they were charged a late fee, the payment was never applied, or it was applied incorrectly. It may be a pain to take these extra steps to document your payments, but it's better than getting hit with additional fees and charges. Here are some other helpful tips:

  • When making a payment online, save your payment confirmation by printing it out and filing it away, take a screenshot of the confirmation on your computer, or document the confirmation number on a dedicated payment document.
  • If making a payment via snail mail, make sure you only write checks with a carbon copy backing, and take a photo of it with your cell phone until it's processed with your bank account.
  • Document everything. Every single time you call in to speak with a representative about your accounts, write it down or maintain a document online. Be sure to note the date, time, duration of phone call, name of representative, the reason for your call and the outcome. This will also come in handy when tracking your payments.
  • Finally, you should commit to paying down your existing debt. Cut out any unnecessary spending and apply the extra cash to your principal balance. If possible, build in extra principal payments to your monthly budget, even if it's just a small amount.

Think About the Future

According to a Pew research center survey, about 51 percent of millennials believe that they won't receive any Social Security benefits and 39 percent believe they will have reduced benefits. Even though recent college grads might just be starting out, now is the time to plan for the future.

With that being said, investing can be confusing and a bit overwhelming. "Stress and fear are major obstacles that many investors have to overcome to begin the investment process," says McElwee. "Having investment funds come directly out of a paycheck and into an employee sponsored retirement plan, an IRA, or a savings account can help get the process started. It's much easier to segregate funds out of your paycheck than have them deposited into a checking account with the idea that someday, sometime those funds will be transferred into another account. The reality remains that once funds are in a checking account, people are likely to spend those earmarked dollars on an item other than their intended purpose."

Moore recommends that students start investing immediately, even if it's only a small amount. He also recommends speaking with financial advisors who have specific knowledge and expertise in working with recent college grads. They will be able to make sound recommendations about how much to save, what types of accounts to invest in, (such as IRA, Roth IRA, 401k), etc.

In addition to considering the financial obligations of an emergency, grads should also ensure that they're protected in the event of an emergency. As soon as a graduate is no longer being covered under her parent's health or auto insurance, she should make sure she is covered through her own plan. Along with health and automotive insurance, grads should have renter's or homeowner's insurance.

Finally, recent grads should make sure that they're continually monitoring their credit and making sound financial choices that will allow them to be ready when it is time to purchase a car or a home. Credit Concierge is a free credit monitoring service that allows users to track and monitor their credit profile. The service is 100 percent free, with no hidden costs or credit card needed to sign up.

College-related debt is increasing and millenials are facing difficult choices about their finances and their futures. The good news is that millenials also have more options than ever before; the job market is ever changing, technology is improving by the minute, and information is right at our fingertips. They can be creative in their career choices and have an infinite number of reliable resources to help them manage their finances.

CompareCards is committed to improving financial literacy for all ages. This series has provided a comprehensive overview of ways students and their families can manage college-related debtFor more information, visit comparecards.com.

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