Finance

Financial Advice Financial Tips for New Graduates

If you are a new graduate, a college degree is just the first step in the new direction your life will be taking. A new career, potentially a new community to live in and a bit of cash in your pocket to spend – there are a lot of changes happening. College graduates carry an average of $25,250 in student loan debt, according to The Project on Student Debt, by The Institute for College Access and Success. Compiled with this debt are the potential expenses of job searching, moving, a professional wardrobe and a new car or bus pass. But receiving that first paycheck – and subsequent paychecks – can lead to bad financial management if not properly handled, says John Vaccaro, Senior Vice President from Massachusetts Mutual Life Insurance Company (MassMutual). “New graduates should curb their urge to spend freely and think about their future goals to avoid financial setbacks like credit card debt and spending beyond their means,” Vaccaro says. To help prevent new graduates from sinking deeper into the debt hole, and to look ahead to saving for retirement, Vaccaro has some financial planning tips to help grads get the most out of their new paychecks. Develop a budget – Almost half of Americans report they’re living paycheck to paycheck, according to a recent CareerBuilder Survey. New graduates should create a budget, including all expenses from rent/house payments, to haircut costs and weekly groceries. Also include space for savings – if possible. Categorize each expense into a necessity category and a discretionary spending category, which will help highlight areas where expenses could be cut – if needed. For example, are payments for cable or satellite TV necessary, or could you survive with free local TV and a less expensive subscription for wireless or mail delivery movie rentals? Setting up a budget can help a new graduate determine if more money from a paycheck can be put into savings. Look into work benefits – The first job is a learning experience for many in figuring out benefits and making them work. Recent graduates should take advantage of any employer offered retirement plans like 401(k)s as soon as they qualify. For younger new grads, the combination of time and potential for a retirement account to grow are powerful in planning for retirement down the road. Health, life and disability income insurance are also good benefit options to research. If your company doesn’t offer these kinds of benefits, consider obtaining coverage independently. Pay off the right debts first – Debt can occur in a lot of different forms for new graduates. Car payments, student loans, mortgages and credit card accumulations are a few of the more common forms of debt. It’s a good idea to pay off those debts that have the highest interest rates and are not tax deductible first. Ideally, a person should have enough savings on hand to pay off a short term debt, like credit card purchases, on a monthly basis. Rein in spending habits – Look yourself in the mirror and identify your spending habits. If you like to impulse buy, try forcing yourself to delay impulse purchases by 24 hours. Also determine if your spending habits are influenced in any way by emotional factors or peer pressure. Once these habits are identified, it’s easier to establish ways to circumvent bad financial decisions. —(ARA)

Myth and Fact: What you need to know

For all of the hard to know discussion around the importance of what’s true, what’s fiction, and what credit scores, it’s lies in between. about credit scores While there are mis-perceptions and misunderstandings still lingering in the marketplace, the good news is that overall knowledge about credit scoring is improving. A recent survey by the Consumer Federation of America (CFA) and VantageScore Solutions, one of the two primary companies that generate credit scores, shows that consumers know they have more than one credit score, have a better understanding about the factors that affect credit scores, and have increased familiarity with how different kinds of companies and entities use credit scores. Consumers also have a good handle on some recent additions to federal laws regarding when lenders are required to inform borrowers about their credit scores. “Increases in consumer knowledge probably reflect, in part, the increased public attention given to credit scores because of the new protections,” says Stephen Brobeck, executive director, CFA. “The improvements may also be related to increased efforts of financial educators, including our own educational website, creditscorequiz.org, to inform consumers about credit reports and scores.” However, despite the positive developments, there’s room for improvement according to the CFA-VantageScore Solutions survey. Myth: Low credit scores don’t greatly affect how much you pay over the life of the loan. Fact: Low scores can be costly. Only 29 percent of survey respondents were aware that on a $20,000, 60-month auto loan, a borrower with a low credit score is likely to pay at least $5,000 more than a borrower with a high credit score. Myth: Age and marital status are factors used in calculating credit scores.

Fact: Over 50 percent of survey respondents incorrectly believed their age and marital status were factors used to calculate their credit scores. The only factors credit score models use are related to your use of credit, especially whether you make payments on time. Myth: Multiple inquiries when applying for a consumer or mortgage loan will have a negative effect on your score. Fact: If multiple inquiries occur during a one-to two-week window, generally they will not lower your credit scores. Only 9 percent of respondents were aware of this, and 34 percent incorrectly believed that each inquiry will lower your score. Understanding credit scoring can be complex, but it’s in your best interest to get the facts straight. With a clear view of what’s true and false, it’s easier to set the course for a sound financial future. For more information about the myths and facts of credit, visit www. creditscorequiz.org, www.vantagescore.com and www.consumerfed. org. These websites are free, do not display any advertising and do not collect any personal data. Both the online quiz and a corresponding brochure are also available in Spanish at www.creditscorequiz. org/Espanol. —(ARA)

It’s tax time and Americans are thinking about how they’re going to spend their tax refunds. According to the Internal Revenue Service, the average tax refund was close to $3,000 last tax season, so who wouldn’t want to get that money back in their pocket?

On the way to claiming your tax refund, here are some simple, smart choices that will help you keep more of your hard-earned money.

Look for free online tax preparation options. If you are a taxpayer with an adjusted gross income of $57,000 or less, you can get free tax preparation through the IRS Free File Program at www.irs.gov or at TurboTax.com.

Don’t pay hundreds of dollars to a national storefront or franchise. Whether you’re a teacher, construction worker, or member of the military, tax software can help you claim every deduction you are entitled to. TurboTax, the market leader in tax software is personalized and guides you stepby-step and even has CPAs available year round to provide expert answers to tax questions and personalized audit support if you need help.

“I switched from a tax pro when I learned that TurboTax has CPAs available to answer my questions,” says Jeff Noll of Chicago. “It’s a great service and takes away any nagging little questions that I was not totally clear about. I felt more confident that I had taken every deduction I could after speaking with an expert. TurboTax definitely helped me keep more money in my pocket.”

Military members serving in the Armed Forces should look for additional opportunities to save on tax preparation. In addition to the IRS Free File Program, some tax software companies offer special savings to military members. Be sure to research your options and look for providers offering tax products that are personalized for the specific needs of military filers.

Looking for more ways to save at tax time? Check out free and low-cost mobile apps to estimate taxes, prepare and file your tax return and check the status of your tax refund. SnapTax lets you take a picture of your W-2, answer a few simple questions and file directly from your mobile phone.

“Remember to e-file and use direct deposit for a faster tax refund,” advises Lisa Greene-Lewis, CPA with the American Tax and Financial Center at TurboTax. “Combining electronic filing with direct deposit is the fastest way to get your tax refund back, in as little as 21 days, once the IRS receives and accepts your tax return.”

Electronically filing your tax return is also more accurate and most online tax preparation websites offer free federal e-filing.

Following these money-saving tips can help you keep more of your hard-earned money. — (BPT)