College graduation is a time for congratulations, excitement, and…debt. Fortunately, 2012 is seeing an uptick in the economy and hiring. The National Association of Colleges and Employers (NACE) indicates that employers are hiring 10.2% more graduates than they did in 2011. Landing your first job is the perfect time to start managing your finances for future prosperity. According to Irvin G. Schorsch III, Founder and President of Pennsylvania Capital Management, there are a few steps to get you started:
1. Always Set Aside A Portion for Savings
Postpone immediate gratification and set aside 10%-20% of every dollar you earn for savings. Setting up an automatic deposit will help you to avoid any obstacles when depositing checks and cash.
2. Take Steps to Eliminate Credit Card Debt
Set an alert on your calendar to pay your bills on time each month. This can help you to avoid the costly interest rates that credit card companies charge. They can stack up and quickly spiral you into thousands of dollars in debt. If you are unable to pay the full amount, at least pay the minimum each month to maintain a healthy credit rating.
3. Pay Off Debts with the Highest Interest Rates First
The higher the interest rate, the more you will have to pay off as it accumulates over time. To avoid unnecessary costs, pay off the debts with the highest interest rates first. Once done, you can then focus your attention on the debts with the lower interest rates.
4. Invest
After paying off your debts, you should begin to invest some of your money. Sign up for your employer’s 401(k) or 403(b). At many companies, the employer will match the first 4% to 6% of your contributions. If possible, invest as much as they will match.
5. Get Your Credit Report
To determine your credit score and to learn where you currently stand financially, make sure to get your credit report. By phone or Web, you can contact TransUnion, Experian, or Equifax for this information. It will also inform you of areas you need to improve in order to increase your score. The higher your score, the fewer obstacles you will face when working to increase your wealth.
6. Diversify Your Investment Portfolio
As you accumulate wealth, begin to put aside some of your savings into a diverse portfolio: cash, stocks, bonds, real estate, and commodities (i.e. natural gas and precious metals). This will help to shield you against misfortune the next time the economy falls into a downturn or recession.
Schorsch reminds us that paying off debt and accumulating wealth is a steady climb and not a race. But by following these steps you will be on your way to building a healthy financial future. Good luck!