Five financial tips for college grads

by Center for Personal Finance editors

NEW YORK (3/28/06)--College graduates soon will pound the pavement looking for jobs, and most of these young adults will need more than a few tips if they're to get financially positioned for the real world (CNNMoney.com March 22).

Negotiate benefits. The entry-level job market is looking more positive this year--the best since the dot-com collapse in 2001, according to some employment consultants--so consider using your leverage to talk bennies. There may be signing bonuses of $5,000 in some industries, and many employers are sweetening their benefit packages. Ask about tuition reimbursement programs, schedule flexibility, telecommuting, or more vacation time. First, though, get the offer.

Lock in your loan rate. Consolidate your student loans before July 1 because rates are going up. If you're still in school and haven't consolidated yet, put your loans into early repayment status and get an in-school deferment. Rates for Stafford and the Parent Loan for Undergraduate Students (PLUS) are likely to move from variable to fixed rates. If you're currently paying on your student loans, the rates won't increase, but interest rates on variable loans likely will increase another two percentage points by July.

Build your credit record. Pay all bills--including utilities--on time. Take out loans and pay them back responsibly. Use credit wisely by charging only as much as you can afford to pay in full each month, and don't go hog wild by signing up for three gas cards, four department store cards, and five credit cards all at once. That flurry of activity in a short period of time will raise the eyebrows of potential lenders who may view you as an increased risk.

Leave the dorm and save for a home. One of the smartest things you can do now is to save and invest for a place of your own. Build that nest egg so you can make a 10% or even 20% down payment on your first home. Buying a home is the best way to build net wealth. Put your savings on auto-pilot with direct deposit and automatic transfers.

Think long term. Retirement seems far off, but your biggest asset right now is time, particularly when it comes to saving money and benefiting from compound interest. Invest as soon as you can in your company-sponsored 401(k), and make sure your investments have more stocks than bonds. If you don't have access to a 401(k), save through an individual retirement account that allows you to save pre-tax dollars toward your retirement. Or, invest in a Roth IRA; your money is taxed now, but you can withdraw it tax-free during retirement.

For more information, read "Ant and Grasshopper Graduate from College" and "Future Grads: Consolidate Loans before Summer" in the Home & Family Finance Resource Center money savvy section.