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Avoid Financial Landmines, Ensure Career Success

Monday, March 5, 2012

Financial obstacles can block phenomenal career possibilities after college. Paying student loans, ensuring good credit scores, and saving for a rainy day safeguard students’ future careers. Laying the proper foundation begins before graduation day.

Student Loans: Albatross or Salvation

Student loan totals in the United States now rank larger than consumer debt. Estimates of the total public debt range from $550 billion by the New York Federal Reserve to $757 billion by Sallie Mae, the student-loan equivalent of the housing industry’s Fannie Mae and Freddie Mac. Banks estimate another $111 billion in private student loans. More than 10 million students took out loans for the 2011 academic year, according to The Economist.

Like other college students, the majority of laboratory students take out student loans to help pay for their education. Before graduation, students with loans should meet with their universities’ student loan departments to understand and determine the best payment plan. Usually, student loan departments can advise students on how to structure their loans, including consolidation of payments. Loan payments begin six months after students finish college.

“Student loan payments pose the biggest challenges for new graduates,” said Jean Marden, MA, a Certified Financial PlanningTM professional and ASCP Vice President of Human Resources and Development. “It is best to set up the student loan payment as an automatic deduction plan.”

Good Credit History

Ms. Marden advises students to check their credit scores at least one or two years before graduation. Some employers check the credit scores and criminal records of future employees before hiring. Job candidates have been denied employment due to low credit scores.

A good credit score for students would be about 650. Sometimes credit information is incorrect, and the extra time gives students time to clear up any discrepancies. Also, this additional time can be used to improve credit scores before graduation. Without credit cards and a history of payments, students will not have a credit score.

“Students should make credit card payments on time because 35 percent of their credit score is decided on this basis,” Ms. Marden said.

Saving: Begin Early and Be Consistent

Temptation is high to spend money after being thrifty in college. But Teresa Y. Harris, MT(ASCP)SBBCM, CQIA, CQA(ASQ), urges students to resist spending and save money.

“You should not reward yourself too much and instead save for the future and to pay back your loans,” Ms. Harris said. Her frugal habits allowed her to retire comfortably last year at the age of 58. Instead of buying expensive coffee drinks, bring a thermos of coffee to work and tote a lunch bag rather than splurging at a deli, she said.

Ms. Marden recommends young employees start saving 10 percent of their paychecks for a rainy day fund. For a single wage earner, the minimum amount should be six months of gross salary. For a two income household, it should be three months of gross salary.

If employers contribute matching funds to a 401(k) or 403(b) plan, employees should provide at least the full amount to match their employers. “It’s smart to maximize employers’ benefit plans for saving, insurance, and other perks,” Ms. Marden said.

To make more money, Ms. Harris suggests young employees periodically volunteer for extra work shifts and save the money for a home and other big-ticket priorities.