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By PORTSIA SMITH
The Class of 2006, set to graduate this month, will soon enter the working world.
The lucky ones have already landed a job. The rest are waiting anxiously for an offer.
While the job market is projected to be in good shape this year, recent graduates will have a hard time enjoying their first real-world pay checks as they try to make ends meet by paying down their college debt and managing new costs: rent, skyrocketing energy bills, increased monthly credit card payments, and other obligations such as car payments and buying clothes for work.
According to the Center for Economic and Policy Research using data from the College Board, the average debt for students graduating in 2003-04, the latest data available, was $15,622 for graduates of public schools and $22,581 for private.
Add to that the $2,169 in debt that a 2004 survey by student lender Nellie Mae says the average undergraduate has racked up on his credit card, and the first year's salary could already be accounted for.
Counselors at ClearPoint Financial Solutions, a nonprofit consumer credit counseling agency with an office in downtown Fredericksburg, said getting hit with real-world responsibilities and debt can be both frightening and demanding.
But with the right preparation, college graduates can make a smooth transition into the next phase of their lives.
"Graduating from college is a major milestone in a person's life, and new graduates are suddenly faced with real-world responsibilities such as career and personal finance," said Ann Estes, vice president of counseling delivery at ClearPoint. "While it can seem overwhelming, facing these new challenges with the knowledge of how to handle them can make the transition a lot easier."
The following are some useful tips offered by ClearPoint Financial Solutions on how to make the most of a recent graduate's new income.
Develop a budgetAn organized budget will put new graduates on track with spending and financial goals.
They should first document regular monthly expenses such as rent, utilities, car payments, insurance and credit card bills. For bills that do not vary each month, setting up automatic payments is a good idea.
Once the bills are paid, it is easy to determine how much money is left over each month for other spending. If the person is unable to follow the plan, spending should be re-evaluated.
Share the burdenThe first few years out of college can be the hardest. Graduates need to balance increased responsibilities, managing finances and finding enough time and money to enjoy their newfound adulthood.
Chances are their spending habits aren't exactly in line with their income. The average starting salary for entry-level positions is $23,000, which may make it difficult to cover expenses.
Finding a roommate to split monthly rent and utility costs leaves more money to pay down debt, or to put in the bank.
Pay off debtWith the lure of low interest rates, easy money and free T-shirts, it should be no surprise that 56 percent of college seniors have four or more credit cards. If not kept under control, balances carried on each card can quickly spiral out of control.
By determining how much is owed, when payments are due, and what finance charges exist, graduates can take control of their debt and begin to make headway in paying down their balances.
It's critical to pay on time, and to pay more than the minimum payment. Missed or late payments can result in costly late fees, higher interest rates and negative notes on credit reports.
Keep an eye on creditGraduates need to learn what most adults already know--become familiar with credit reports.
By learning how to keep personal financial information in check, they can avoid inaccurate credit reports, overdrawn accounts and identity theft.
Everyone is entitled to a free credit report from each of the three credit bureaus each year, and can access it at annualcredit report.com.
Periodic checks help prevent damaging errors. If inaccuracies are found, credit bureaus should be contacted directly to resolve the dispute. In order to protect yourself against identity theft, financial information containing account numbers, Social Security numbers or other personal information should be shredded before being thrown away.
Pay yourself firstNow is the perfect time to start saving for the future. It's important to recognize the benefits of saving money and put them into practice.
A budget should include a line for savings in addition to bill payments. Opening up a savings account and enrolling in savings plans offered by employers, such as a 401(k), will pay big dividends in the future.
A well-developed savings plan offers the opportunity to handle emergency expenses without turning to credit cards. It also provides a jump start on saving toward an early retirement--or that first house.
Work with a professionalIt often helps to work with a financial planner trained to help with responsible money management.
For recent graduates seeking help to create a budget, improve a credit score or simply develop strategies to save more money, a credible credit counseling agencies can objectively assess financial situations and develop individualized plans.
Some banks and institutions in the area also offer financial workshops.
To reach PORTSIA SMITH:
Email: psmith@freelancestar.com
