CREDIT COUNSELING Experts: Early financial plan is key for grads

Five percent to 10 percent of gross income should be set aside every month for retirement, experts say.
After four or more years of higher education, continuing education isn't the first thing on a graduate's mind.
But with a little bit of financial education and planning, a graduate may be able to secure a safe financial future.
"It all comes down to controlling your finances at a young age because it carries on beyond that, into the rest of your life," said Victor Russell, Area Manager of Consumer Credit Counseling Service of Northeastern Ohio.
William L. Anthes, Ph.D., president and CEO of the Colorado-based National Endowment for Financial Education sent similar advice. "The fiscal choices you make immediately after college can help or hinder your chances of building a strong financial base for the rest of your life."
The NEFE is a nonprofit foundation dedicated to helping Americans achieve financial success.
Financial planning
"Start learning how to plan at a young age," Russell said.
The NEFE recommends learning a new financial topic each week to cover the basics of personal finance.
Learning about 401(k) plans, Individual Retirement Accounts and investments at a young age will give graduates a head start.
"Everything starts with a budget," Russell said. "Control money with a review of your budget on a weekly basis."
"It's best to start small and progress up. Maybe just buy a compact car at first, then later on move up to the Range Rover or Explorer," Russell said. "You'll save money on fuel, repairs -- everything is inter-related."
Check your credit before any large purchase, such as a car. More than likely, a low credit score (below 675) will result in a higher price tag overall. Knowing what you are up against will help in the bargaining process.
Real estate
A house payment should be 28 percent of an individual's gross income, and no more, including taxes and insurance, Russell said.
Avoid interest-only mortgages. Instead, look for conventional money mortgages with fixed rates and terms.
"We always tell people to be wary of adjustable rate mortgages," Russell said. "Avoid unsecured loans; asset loans are best."
Additional help may come from a loan officer at your bank. Establishing a good relationship with your bank before purchasing a new house or car will help secure a better rate.
The NEFE also advises considering qualifying for a mortgage based on only one partner's income if part of a two-income household in case of a job loss.
Credit cards
Avoid acquiring a large amount of debt while young and paying for it for years to follow.
In 2002, the outstanding average credit card balance for a sophomore student in college was $1,542. When that student reaches their senior year, the average credit card balance is $3,142.
If only one credit card is used, it is easier to track spending and avoid spending more than planned or can be paid.
About 5 percent to 10 percent of gross income should be set aside every month for retirement and a 401(k) plan is the best investment choice, Russell said.
Many employers offer plans that will match the amount you put into the plan, or at least a portion.
"If you want to take chances, be risky with stocks at a young age, while you can," Russell said. "Do it now while you have no family to support."
The NEFE also reminds workers that contributions to a 401(k) are deducted before taxes are taken out of a paycheck, reducing tax liability and the savings will grow tax free until they are withdrawn.
"If you start investing at a young age, you will have more than enough to retire on," Russell said. "Start building now."
Student loans
It is becoming uncommon for students to complete college degrees without student loans, and the post-graduate payments can be overwhelming.
While it is possible to refinance student loans to make very small payments over decades, Russell advises against it.
"The sooner you can pay student loans off, the better," Russell said. "Get out of debt quickly -- student loans are considered unsecured debt, like credit cards."
Be responsible
"Start being proactive about your credit by checking it once a year," Russell said. "There are no penalties for reviewing your credit."
There are three credit reporting agencies that offer a free credit report once a year, Equifax, Experian and TransUnion.
A credit score is a culmination of payment history amounts, length of credit history, new credit -- too many new accounts may look bad -- and about 10 percent of the score considers the diversity of the types of credit.
For a free credit report, call (877) 322-8228 or visit
More financial guidance is offered through free credit counseling, and debt management is available from Consumer Credit Counseling Services. Contact CCCS at or by calling (800) 355-CCCS, Ext. 2227.

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