Eight Steps to Financial Fitness After College Graduation

ALBANY, NY (06/03/2010)(readMedia)-- Maria recently graduated from college and was relieved to have a job lined up that she could start right away. But, she worries about how she'll transition from life as a college undergrad to a career woman and manage a job, an apartment, living expenses and student loan debt.

The New York State Higher Education Services Corporation, the state's financial aid agency, offers money management tips to help Maria and other new college graduates launch a lifetime of fiscal fitness.

Create and stick to a Budget

The first step to controlling your finances and living within your means is to assess your income and expenses and create a budget. Your spending plan will let you know how much money you have and where it needs to go.

Develop a sensible spending plan that will be easy to stick to; if you feel negative about a spending plan, it won't be successful, so keep it real. A budget will empower you to control your financial future. Grab a pencil and notebook, or use the tools at HESC.org and get started. Remember to meet your "needs" first, then your "wants," as you can afford. Revisit your budget regularly to make adjustments as necessary.

Determine your income

It's pretty basic, but there is a difference between your gross income and your actual take-home pay. Net income is what's left after federal, state and Social Security taxes are deducted. Additionally, you may have deductions for health insurance, retirement plan contributions, parking, dues or other withholdings that may affect your take-home pay; all of this information is outlined on your pay stub. When planning your budget, remember to use your net income, after taxes and other deductions.

Determine your expenses

Take charge of your daily, weekly and monthly expenditures by keeping a spending diary. List your rent, credit card and student loan payments, insurance, clothing, entertainment, groceries, including every cup of coffee, every bottle of water, or anything else you buy and its cost, for a month. List your cable, phone, power and water bills separately, rather than lump them together as "utilities." Also, separate your weekly grocery costs from your eating-out expenses.

If you remain diligent during the tracking period, you may be surprised to see where your money goes and you may identify patterns to help you re-evaluate and re-prioritize. For example, if you find yourself buying lunch every day at a local deli, you might be able to save $30 a week or more by bringing lunch from home. Or, if cable or phone bills are draining your budget, dropping back to a lower plan may help bring your budget into balance.

Itemizing these details in your plan will help set limits and prioritize. You will determine what you really need versus what you want, and achieve your financial goals.

Save for your future

When itemizing your expenses, it's important to pay yourself. If you don't already have one, open a savings account for unexpected expenses such as car repairs, medical expense, or job loss. The rule of thumb is to have six months of living expenses in savings to cover life's unexpected curve balls. A savings account will also help you reach your financial goals, whether they are to travel, purchase a home, or save for retirement. To make saving painless, consider having a regular amount automatically deposited to your savings account from your check each pay period.

Use credit wisely

Establishing good credit is a powerful tool to help reach some of your financial goals. Misused credit is an equally powerful detriment to your financial future. It's important to choose and use credit wisely. Know the interest rate before you apply for a credit card and don't fall victim to short-term teaser rates that will later increase. Limit the number of cards you have and when you use a credit card, track your purchases and make every effort to pay off the balance in full each month. If you have left college with a credit card balance, work on paying it off by making more than the minimum payment.

Review and understand your credit report

A credit report helps potential creditors determine risk. The report includes your Social Security number, address, employment and payment histories, current level of indebtedness, types of credit used and length of credit history. Public information including criminal or financial judgments, liens and bankruptcies are included. Your nationality, age, gender, martial status and credit score are NOT included on your credit report.

Your credit report indicates how well you manage your credit over time and your risk to a potential creditor. Your credit report is used to determine your reliability in many more ways than you realize…here are a few ways a credit report can affect you right now:

Shopping for a new cell phone plan? The sweetest deals with the most minutes and phone options go to those who have the best credit rating. Those with poor credit ratings may be offered only pay-as-you-go plans.

An apartment? The landlord may check credit records and reject applicants who are poor credit risks. Utility companies check credit reports, too. Those with a poor credit history may be asked to pay a deposit of up to $500 or more before service will be connected.

Looking for a job? Many employers check your credit report before making an offer. Employers are looking for people who are considered reliable and responsible.

The bottom line: Having a poor credit report can significantly impact your ability to borrow or get credit and may affect the interest rate on the loans or services you may be offered.

Everyone is entitled to free annual credit reports from each of the three largest credit reporting agencies -- simply log on to www.annualcreditreport.com. Check your credit report at one of them, every four months or at least once a year, especially before any major purchases such a car or a home mortgage or if you have been denied credit within the last 60 days.

Protect your identity

The best protection against identity theft is prevention, so take steps now to safeguard your personal information:

• Protect your Social Security number
• Dispose of mail and identifying documents carefully
• Select intricate passwords
• Verify sources before sharing information
• Safeguard your purse and wallet
• Store information in secure locations

You can find more information at the Federal Trade Commission's Web site, Fighting Back Against Identity Theft.

Know when to ask for help

Signs of trouble may include using credit cards to pay for minor purchases, making late payments or skipping them altogether, or frequently going over your credit limit. If you find yourself in these situations, you may need help getting back on track.

First, reexamine your budget to identify spending you can adjust. If that doesn't work, or you feel overwhelmed by your finances, ask for help. Contact your creditors and ask for assistance. You may also wish to work with a free or fee-based credit counseling service. The New York State Consumer Protection agency offers help in locating a reputable credit counseling and debt management services.

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