Financial tips for college graduates (and their proud parents)

As millions of graduates are beginning life on their own, earning
their own salary and paying their own bills, they find the transition is not necessarily easy.

Some leave college already weighed down by debt.

According to the College Board's Trends in Student Aid study of 2007-2008, the median debt for all bachelor's degree recipients was $11,000. Of the two-thirds of students who actually borrowed money, the median debt was $20,000. The average starting salary for a new graduate is $30,000.

Bill Hardekopf, chief executive officer of Lowcards.com and author of The Credit Card Guidebook, says this is the perfect time for graduates to "face reality and develop a budget" or financial pressures will only worsen.

"It can take a lifetime to pay down debts incurred in college. The good news is this the best time of your life to set good savings and spending habits. For most graduates, this can be a time when they can live cheaply and flexibly and develop a stable financial footing," he said.

Here are some tips from Bill on how you can get off to a good financial start. Read through them and leave us your tips below:

1. Budget everything and put every dollar in place.
Start with your net income, not the salary number they give in the job offer.
What is your income after taxes, health care, and retirement are taken out? This is the amount of money that you have to work with each month.

Expenses always seem to cost more than you estimate and this underestimating can be a budget buster.
Ask questions. How much will utilities and health care really cost? Track your spending for a month to get an accurate understanding of where your money goes. This can help you plug the leaks where your money is slipping away.

2. Start saving immediately from every paycheck, even if it is only a small amount.
There will always be a good reason to put off saving, but saving is a habit, and the sooner you start the better off you will be. Open a retirement account at work or your own IRA. Time and compounding interest will help your small amount grow into significant savings by retirement.

"If you have been a starving college student living on a tight budget, continue to keep a tight lid on expenses. Even if you are start with a good salary, put as much as you can in savings," Hardekopf said.

Open a separate savings account to build up an emergency fund. The goal should be three months' income. If you lose your job or have sudden, unexpected expenses, your emergency fund, not your credit cards, should be your safety net. Using loans to pay for an emergency simply adds to the cost of the emergency.

3. Pay off your credit card debt.
The average college student has 4.6 credit cards, according to the report "How Undergraduate Students Use Credit Cards: Sallie Mae's National Study of Usage Rates and Trends, 2009."

If you carry a balance, do not put new purchases on your credit card. "If you can't pay for it with cash, you can't afford it, so don't buy it," Hardekopf warns.

4. Set a payment schedule.
If you are not trained in paying bills, it is easy to misplace a bill or pay it late. This can be punished by late
fees and even lower credit scores. The easiest way for young people to pay bills is to do so online with scheduled reminders for payments.

5. "Study" to improve your credit score.
Your credit score is more important than just about any other grade you received in college. It is the number
that lenders, employers, and even renters will use to judge you. A high score (FICO 720) will get you the lowest rates and save money on auto, credit card and mortgage loans.

Pay your bills on time. Keep your credit card balances under 30% of your credit limit. Build a long and solid payment history with your credit cards.

Monitor your credit history with free annual credits reports through annualcreditreport.com. You can get a free credit report from each of the three credit agencies (Equifax, TransUnion, and Experian) each year.

6. Accept reality.
You are the only person who is responsible for your financial future. Your success starts now with the habits you make today.

Your friends will not treat money exactly as you do. Some will go into large debt to get anything they want. Others will be subsidized by their parents and live beyond their means. Don't get caught up with envy and keeping up with the lifestyle of your friends; they are on their own path and comparisons can be tormenting.

"In the real world, finances are a balance. You won't always be able to afford what you want when you want it. But sometimes you save up enough. Sometimes you even have a little more than you expected. Spend
a little, save a little, share a little," Bill said.

7. Don't fall in love with someone for money, but make it a priority and pay attention to how your potential mate handles money.

Financial personality should be part of the screening process for a possible mate. Marriage unites not only your lives, but your finances and credit scores. Don't wait until the first month of marriage to ask how much credit card and student loan debt they have--then it is too late. Can you make a payment plan together now and reduce that debt before you get married? If they are a free-spender with significant debt and you are a saver with little or no debt, deal with this now because these are issues that will cause conflict in marriage.

And here's one for our proud parents:
8. Parents must start early to prepare their students for financial independence.

Put your college kids on a budget. Give them a fixed amount of money every month that is just enough to cover their expenses each month and they will learn to control their spending--a skill they must have when
they are on their own. One day they will have to survive in the world without the bank of unlimited funds from their parents. Will they be able to handle this? Or have they been spoiled and developed bad financial habits that don't magically disappear when the paycheck and the bills are in their name.

The CARD (Credit Card Accountability, Responsibility and Disclosure) Act makes it harder for students to get credit cards.
College is a good time to start building a credit history. Young adults under 21 are now required to show proof of income or have an adult co-sign on a new credit card account. A parent should only co-sign if
they are certain their student can use the card responsibly since mistakes by the young adult can severely damage the parent's credit score. But if the student is responsible, it can help the young adult build their credit
history. A secured credit card that reports to a credit agency is another option although the fees on these cards can be expensive.

"It is the parents' or guardian's responsibility to prepare young people for taking care of their own finances. This is not an education they should learn by making their own mistakes. Even a few late payments can create significant financial damage that can put a young adult far behind," Bill said.

Leave a comment and let us know what you think and what techniques you're using to gain your financial footing...