Sunday, June 15, 2008

Seven Steps for Financial Success for the Post-College Graduate

As biased as I think can be when it comes to many of their articles (of the political persuasion, anyway) I have to admit that their "Money & Finances" section is pretty darn handy.

Just today, I read Your Five-Minute Guide to Money in Your 20's. Given that Super Careo and I are approaching our mid-20s, I also decided to read some other articles about what, apparently, makes a twentysomething successful, financiallly-speaking. So I've compiled Seven Steps for Financial Success for the Post-College Graduate, the first four of which I'll share in this entry.

Step One: Get a Job

For most people, this is a no-brainer. However, a lot of individuals make the critical mistake of selecting a job that is financially a disaster, or simply is below their skill set. So chuck the lazy attitude, and prepare for these four tips:

1. A suit, a hair cut, and a new pair of shoes are a financial must. This will make all the difference in the world in a job interview. Let's face it; not everyone can show up to their job interview in dirty clothes and nail the position a la Christopher Gardner, the protagonist of "The Pursuit of Happyness." Still, they don't have to cost an arm and a leg. Consider going to a local beauty college, which will do hair cuts at a reduced price and generally offer free consultations. For suits and shoes, check out discount outlets, the Goodwill or consignment stores such as Plato's Closet, which offers popular clothing at a great markdown. Even stores such as Kohl's can be a good investment, because they frequently have clearance specials marking clothing down by 80 percent.

2. Don't waste your money by selecting a resume kit. There are many free versions offered on-line, including Resumizer, The PC Man and The How-To Resume Builder. However, even going to employment giants like Monster and CareerBuilder can be beneficial, because in addition to helping you find gainful employment, they'll actually build a basic resume and cover letter for you. Also remember you can always ask a trusted friend, particularly if they specialize in Human Resources or English, to help you punch it up a bit.

3. Don't be afraid to use your connections. If you're a college graduate, make sure to contact your alumni chapter. Were you in a sorority, fraternity, or any kind of ordained membership? Those affiliations can help open doors in the post-education world.

4. Don't accept jobs that might pay more in the beginning, but have nothing to do with your degree or your intended plan. This can lead to professional stagnation and later, job apathy.

Step Two: You're Hired!

Okay, congratulations are in order. You are officially a working-class adult, fully fiscally responsible, right? Wrong. The immediate afterglow of the first working job is when many twentysomethings make their first mistakes. A few tips to remember:

1. Your paycheck isn't as big as you think it is. You're getting more money, but Big Brother is also taking more of what you earn, something that early budget-makers forget when calculating out their expenses. Still, PaycheckCity offers a great calculator which helps to determine how much take-home pay you actually receive.

2. Be aware of what your job means for your tax return. If you're like me and have never handled your taxes, it's a good idea to enroll in a tax class (many community centers and community colleges offer them at reasonable rates under "Continuing Education" banners) so you have a better idea of where your money is going, and how. This will also help you plan for deductions.

3. A career, as much as a penny stock or an IRA, is an investment. It's important that you manage it better than any other investment, which includes showing up on time, completing your work under deadlines and setting higher expectations for yourself that aren't unreasonable.

Step Three: Banking

Securing a job doesn't mean that it's time to stash money away in a cookie jar and hope for the best. The days of saving pennies for a rainy day have pretty much passed, so a financially-responsible person needs to begin investigating banking. These days, it isn't uncommon for parents to set up bank accounts for their child, either to begin saving for college when they're very young or to offer them a start into the world after they've become an adult. Either way, especially if someone is starting out in a new place, it's important to select a bank with the same methodical investigation as any other major investment.

1. Don't just take the first bank you come across. Like with any other major investment, it's important to do your research and find out which bank offers you the best plan for your individual lifestyle. offers the following tips:

a. Fees. Many banks are charging more for previously complimentary services, such as bank statements, overdraft protection, customer inquiries and so on. Therefore, it's important to determine what your bank charges for these services and respond accordingly. For example, many banks are now going to "paperless" bank statements, preferring instead to send their clients e-mails, and some banks, such as Commerce in Kansas City even offer monetary incentives for their clients to go digital. Investigate which areas will allow you to cut corners--but be cautious; never skimp on overdraft protection or statements, period. Murphy's Law proves that just when you think overdrafting can never happen to you, it will and banks do make mistakes, meaning it's important you receive and examine your statement, whether by postal mail or e-mail.

b. Minimum Balances. The upside to having a minimum balance is that it does help with more effective budgeting, but only if you're informed enough to know that there is a minimum balance to begin wtih. I fell into this pit with both my savings account and my checking account, which I keep at two separate banks. Unfortunately, at both my checking and savings account, I failed to read the fine print and only after I spent several thousands in fees (enough that really, I should probably have a wing of the bank named after me at both locations) did I discover what my tellers had glossed over during the process of opening my accounts: each requires a minimum balance of $100. What's worse, some banks will charge even higher amounts for falling just a few pennies under $100 than if you were to bounce a mortgage check, so be cautious. When opening a new account, ask the teller directly what expectations are with the account such as minimum balances, and if you ever feel that you're being silver-tongued, take the paperwork home before you sign anything. Opening a bank account shouldn't feel like purchasing a used car.

c. Direct Deposit. All banks offer this fine feature, which automatically deposits your paycheck into your bank account, but some banks will also give you an incentive for signing up for it.

d. ATMs. Hopefully, by the time you graduate, you've learned your lesson on the ATM disaster of taking too much money out at a time and the like. Still, many people rely on the ATM for instant, fast cash. So if you're a person who has an ATM machine that won't burn a hole in your pocket, consider the number of locations within your vicinity, as well as the bank's policies for ATM machines. Most banks will offer free ATM withdrawals to their own customers, while charging fees anywhere from $1.50 to $5.00 for non-bank customers.

e. Locations. As with the ATMs, locations can be important. Perhaps you realize that the check you wrote yesterday might bounce if you don't rush and put $50 in cash into your account on your lunch break. If your bank is within walking distance to your job, this is a relatively easy fix. Unless you prefer online banking, at which case location is a moot point.

f. Online Banking. Many banks are offering online banking for their drive-thru wary customers, but there are several concerns when operating this way, the main being identity theft. Therefore, the best approach is a hybrid one: still complete your transactions, such as check cashing and cash withdrawals, in person, but consider signing up for your bank's online bill pay or banking tracker, if those are services that they offer. Following your account's activity online is another way to manage your ledger and stay consistent with how you track your expenses, purchases and financial gains, and also ensure that the bank isn't making clerical errors on their side.

2. Talk to your co-workers or other individuals you might know about their own banking experiences. How long have they been banking with their individual place? Have they been hit with a multitude of hidden fees, or did they notice a strong return on their savings? Consider visiting a local branch of the banks they use and see how you are treated. If you notice frustrated customers or bad service, then reconsider starting an account there. If your friends or family have an account a particular bank, ask them about their experience.

3. Research the different account options. Whether you need online banking access, a free, no minimum balance checking account or a business account, do your research to see which bank offers the best options for your lifestyle. Read the information online and compare you options. You should also think about what specialized financial services you may need in the future. If you need the ability to transfer money worldwide or you require a business loan in future, find out if your bank offers these type of services

4. If you work for certain employers such as a major airline, large school district or other large corporation, they sometimes operate their own credit unions. These credit unions may provide you with extra benefits and options versus a regular bank. However, as with researching a bank, it's important to be completely informed as to what they're offering and to what extent, as well as the potential drawbacks.

Step Four: Housing

Nobody likes living at home with Mom and Dad. In fact, I know three college graduates who are residing with their parents, and actually have a curfew. Having not had a curfew since I set my own at 17, I think it's an unfortunate reality, but in this economic market, who can really blame them? Still, not everyone has that luxury. For example, in six months, I'll be moving across the country and obviously, living with my 'rents isn't really an option, and for about 70 percent of college graduates, this is the reality.

1. Make sure that your bank account is taken care of first thing. Many landlords or rental authorities require the first and last month's rent to be paid upfront with a certified check or money order.

2. Find your apartment. The process can be a long one, but it doesn't have to be difficult. It's a matter of common sense. Claes Bell suggests the following:

*Be informed. Before you even begin the application process, you should be upfront with questions and as well informed as possible about the property. Know where your potential landlord stands on pets, qualifications for tenants and other possible deal breakers. If you do have any potential red flags, such as lack of current employment, need for a co-signer or having a checkered credit history, mention those things at the beginning.

*Do a walk-through. Once the application process is done, the next step for a diligent renter is a thorough walk-through of the apartment, preferably with a property manager or owner, to make a note of any pre-existing damage. Make an itemized list of things that are wrong with the apartment, such as tattered blinds, a faulty doorknob or a leaky faucet, and have the agent sign it, otherwise there's a danger later that you could have to pay for it, warns Tracey McCartney, Executive Director of the Tennessee Fair Housing Council in Nashville.

*Get Renter's Insurance. If you already have an auto policy with an insurer, you may be able to get renters insurance through them. Either way, a renters policy is inexpensive, essential protection against theft, natural disaster and liability. If the apartment complex burns down, for example, the complex's insurance will pay for your apartment damage, but not your stuff. And if it's something in your apartment that burns stuff down, the apartment's authority company may try to come after you, whereas renter's insurance can protect you from that.

*Read the Lease. It seems common sensical, but most people don't read what they sign. Remember that scene in "Farenheit 9/11" when Michael Moore proved most representatives of Congress had failed to read The Patriot Act before they signed it? The same is true of the general public. However, the lease's fine print can spell a number of things out, such as if you want to have a significant other move in, move out early or arrange for a sublease. According to McCartney, you should never rent from a place that won't give you time to read the lease or offer you a copy to take home.

*Negotiate.. If you see something on the lease you don't like, don't be afraid to negotiate. Most landlords or property managers will have standard terms on things like security deposits and the term of the lease, but, depending on their circumstances and the market you're looking in, they may be willing to change their terms to get you into their property. In some situations, they may even be willing to negotiate the rent, so make sure that you have a list of things you may want to ask for prepared ahead of time. That way, when it comes time to hash these things out with a landlord, you won't forget anything in the heat of the moment. This is also a good time to address the issues you found during your walk-through. Whatever the case, do not sign the lease until you know who is responsible for what financially, and who to call in the future with issues. The next six to 12 months could either reward you for your due diligence or make you wish you'd been more thorough.

3. Budget for your expenses. Bell suggests that those preparing to enter their own apartment need to have the financing for six things:

a. Application fee or deposit holds the apartment while renter's background is checked.

b. Broker's fee if renter uses a third party to find the apartment.

c. Security deposit is usually one month's rent, refundable at the end of the lease.

d. First month's rent needs to be paid.

e. Insurance to cover renter's belongings.

f. The last month's rent.

4. If you're looking to lower the cost of living independently, investigate a roommate. Ask around at work--newly-separated individuals or married people in the middle of a divorce can make for good roommates because they're used to residing around another person and paying bills. Consider checking Craigslist or other online sites, but never be afraid to ask for references upfront. Meet the potential roommate in a public place and consider bringing along a friend for the initial interview. Always check the references out first and if you can, obtain a copy of their credit history. Once you have selected a roommate, outline the responsibility of chores and bills, and get it in writing. Have the roommate sign a lease or a sublease, agreeing to all the terms.

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