1st 5 Money Moves A New College Graduate Should Make

The season of new grads is officially upon us, and the U.S. National Center for Education Statistics anticipates over 3.4 million degrees will be handed out to students completing their secondary education in 2012. With so many young adults entering the consumer world, often without the assistance of parents, the first few steps couldn't be more important.  

Here are the first five things you should do once you've gotten that degree and are preparing to enter the "real" world for the first time:

1. Create a Budget

This step is not only deemed to be one of the most important actions for a new graduate to embrace, it's a skill that will benefit them throughout their lifetime.  

Howard Dvorkin, founder of ConsolidatedCredit.org and author of "Credit Hell: How to Dig Out of Debt," advises grads to realistically consider their "true" salary of any new job. "Many college grads are starry-eyed at the salary they will be making at their first job. They should do their homework and find out the difference between the gross and the net pay they will be receiving." This will ensure budgets are realistic and can effectively be used to succeed. 

2. Prepare For New Taxes

Many college grads have already filled out a simple tax form, but they may have previously been claimed as a dependent on a parent's return. Proper handling of tax reporting should happen many months in advance of the deadline, says Dvorkin. Deductions that can be overlooked come tax time, include:

  • Resume services
  • Mailing costs
  • Interview travel costs
  • Moving expenses
  • Charitable contributions

All expenses should be documented carefully throughout the year to maximize tax savings.

3. Obtain Insurance

If the new grad was under the age of 26 upon entering college, chances are good that they have never had to purchase insurance on their own. Graduates may find themselves looking to get independent policies for car, renter's or even health insurance, however, and these new expenditures can be costly.

#-ad_banner_2-#For car insurance in particular, Dvorkin suggests these actions for keeping premiums within the budget:

  • Consider safety. Ask your insurance agent to check your vehicle against the National Highway Traffic Safety Administration's safety report. Cars with higher safety ratings will come with a lower premium.
  • Pay in advance. Many insuring companies charge between $2-$15 a month to break up an annual premium into monthly installments. Prepayment will save more money.
  • Raise the deductible. Unless there is a lien against your vehicle due to financing, there may not be a need to get the most expensive coverage available. Raising your deductible from $250 to $500, for example, can potentially lower your overall premium by 25%.

4. Open a Single Credit Account

Kevin Gallegos, Vice President of Phoenix Operations at the Freedom Financial Network, emphasizes that getting credit right is more important than having a high volume of credit available. In addition, he advises grads to do the following:

  • Stick to one card. Consider this card to be your only plastic, and use it as you would cash.
  • Never carry a balance. Paying interest is not in a consumer's best interest.
  • Consider a debit card. During the first years of learning, this flexible solution can set patterns of healthy credit use in place.

5. Check Your Record

Getting a peek at your credit history is recommended at least annually, and new grads can grab a copy for free from all three reporting companies by visiting AnnualCreditReport.com. According to Gallegos, not only is a sound credit history necessary for securing future credit for a house or a car, it has been a deciding factor in job eligibility, as well. New grads may find they need to resolve a sticky credit situation before getting the career of their dreams. 

The Investing Answer:  While easier said than done, the most important move a new grad can make is to master the art of living within financial means and making a lifelong commitment to do so. Not only will it open greater opportunities in the consumer credit realm, it will allow for a lifetime of lower stress and greater overall happiness. 

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