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Smart financial moves for college graduates

POSTED: June 28, 2007 5:02 a.m.

It’s that time of year when students from across the country graduate from college. If you’re one of them, you’ll be anticipating a new chapter in your life. And that means you’ll have to do your homework on a very important topic: your financial situation. It’s one subject in which you’ll definitely want to earn a passing grade.

Of course, if you’re like many recent graduates, the financial issue that might weigh heaviest on your mind is your student loans. To help pay for college, about two out of three students take out loans, with the average debt amounting to more than $19,000, according to figures from the U.S. Department of Education.

Whatever the amount you have borrowed, you will need to make arrangements to pay for it. If your loans aren’t too large, your monthly payments may not be overly burdensome, but, in any case, it’s a very good idea to stay current on your payment schedule — falling behind can lead to big problems down the line.

Apart from paying back your loan, though, you’ll have other financial considerations upon graduating college. Unless you’re going to graduate school, you might be starting at a full-time job, which means you’ll have to quickly learn some money-management skills — and one of the most important of these skills is budgeting. At this stage of your life, you may not have a lot of disposable income — especially after paying for rent, which will probably take up a sizable portion of your paycheck — so you’ll want to track your expenses carefully and be as thrifty as possible.

Still, while you’re thinking about today, you’ll want to plan for tomorrow. If you want to save for a car, or perhaps later down the line, a house, you’ll want to get in the habit of investing something on a regular basis. Even if you can just put away $50 or $75 per month at first, you may see some accumulation after several months. And just as importantly, you’ll get in the “savings habit,” which, if continued throughout your working life, can pay off for you in many ways. Dollar cost averaging does not guarantee a profit, nor does it protect against a loss in a declining market. You should always consider your financial ability to continue investing through periods of low-price levels. If you don’t know how you should invest your money, consult with a financial advisor — and don’t be deterred from seeking out professional help because you’re “only” a “small” investor. Many highly qualified financial advisors will be more than willing to meet with you and help you out — you just have to find someone who’s right for you.

You might also get some investing help, in a way, from your employer. If you’ve landed a job with a company that offers a retirement plan, such as a 401(k), take advantage of it. While retirement may be quite far from your mind at the moment, an employer-sponsored retirement plan offers the chance to invest on a tax-deferred basis, which means your money will grow faster than it would if you invested it on an account in which you paid taxes every year. So, put away what you can afford — at least enough to earn your employer’s matching contribution, if one is offered — and increase your contributions as your salary rises over time.

By following these suggestions, you can start your life in the working world with a solid grasp on your finances — and that’s a grip you won’t want to relinquish.

Jeff Hupman is a financial advisor with Edward Jones in Rincon.

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