Job prospects for this year’s college grads are much brighter than a year ago. A national survey conducted by the National Association of Colleges and Employers (NACE) reported that 53% of employers surveyed intend to hire more college graduates from the class of 2011 than from the previous year. In March, the Business Roundtable announced that 52% of the 142 CEOs who responded to its quarterly CEO Economic Outlook plan to add staff in the United States over the next 6 months – that‘s the highest level since the group began doing the survey in late 2002.
Landing that first job marks the first time many of these young adults will be truly out on their own with the sole responsibility for their own spending and savings. Making ends meet can be a challenge for new college grads, especially if they leave school with a heavy debt load of college loans. But with good planning, the right amount of discipline, and sufficient time, these grads can make significant strides in establishing a comfortable lifestyle, hunkering down and taking the first steps to building true wealth. Here’s how:
- Pay yourself first. It is age-old advice, but it works. For each dollar earned, 10 to 20% should be set aside for liquidity and to start building wealth. Begin to build success by setting up automatic deposits from your paycheck directly to your savings account.
- Whittle away at credit card debt. Protect that credit record; it will take you far in life! Paying every bill within the grace period should be a top priority. The interest charged by credit card companies is typically at much higher rates than most other types of debt. And, the interest paid is not tax deductible. While it is highly recommended to pay off more than the minimum required payment, paying the minimum is much better than having delinquent or missed payments on a credit record.
- Bring the cost of borrowing down sequentially. One of the keys to accumulating wealth is eliminating debt. College graduates should evaluate the interest rates associated with student loans and other financial commitments. Work toward paying off the ones with the highest rates first.
- Join your employer’s 401(k) or 403(b) plan. Participating in an organization’s defined contribution plan and contributing the maximum amount possible to receive the full employer matching contribution will ensure you get all the free money you deserve. Some employers will match 4-6% or more of their employees’ contributions. This employer match represents an instantaneous double digit to 100% return on investment simultaneously with your own money.
- Know your credit score. Call or go online to TransUnion, Experian, and Equifax to get a free credit report. If a credit problem exists, get it resolved. If any of the information is incorrect, get it corrected. A poor credit score can severely impede borrowing and wealth building prospects.
- Diversify savings and investments. It will take more than just putting money in the bank or a 401k to build significant wealth over time. Smart investors consider a variety of asset classes to balance their risk and enhance portfolio returns. A well-balanced portfolio, regardless of size, will have a mixture of stocks, bonds, cash, and possibly real estate and hard assets (including precious metals and commodities).
The key to building wealth is being doggedly disciplined – in both spending and saving. It doesn’t take a whole lot of savings each week or month to begin building wealth. It just takes a cohesive investment strategy and time.
The information in this article is general in nature and may not apply to your own financial situation. Please consult your own professional tax advisor regarding this information and your own personal tax needs. For a complete disclosure statement, please see my biography.