7 Smart Money Strategies for New Workers

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There are more than one million recent college graduates entering the job market this year– many with absolutely no clue how to best manage their money in the “real world.” You can’t just swipe your prepaid meal card to eat in the dining common. Your school’s sponsored health insurance plan has expired and rent will probably never be as low as what you paid for your spacious room in the frat house.

What’s more - today’s “real world” involves a challenging labor market, fewer health and retirement benefits paid by employers and individual debt loads mounting in the tens of thousands of dollars as a result of students loans and high credit card balances.

Here are seven money strategies to get off on the right financial track.

1. Become a Homeowner ASAP.

You heard me. Sounds crazy, but time is ripe to be a homeowner with prices falling and homes in foreclosure. And young adults – particularly women – are kicking butt at this game. Single female homebuyers are the fastest home buying population after married couples. You’ll need good credit, cash and confidence. It may take a few years, at least, but, in the meantime, start paying off your credit card bills from college, live back at home with mom and dad to save money (more than 50% of this year’s grads are doing this, so you won’t be labeled a loser) and start visiting open houses to get familiar with the housing market in your desired location.

2. Don’t Lean on the Man.
In a weak job market, young workers with the least experience often get hit hardest. In some cases, they’re typically the first to get pay cuts and pink slips. And forget banking on a raise, especially if you’re entering the financial sector. Merrill Lynch, we hear, is on a hiring freeze. Now’s an important time to boost your revenue streams. And to keep a tight budget.

3. Be a SNOB with your $$.

Don’t let others dictate how you allocate your funds. It’s easy to become an ATM for your friends and to fall for money scams and credit card offers. Your first priority is to protect your income and make the most of your paycheck to fulfill your financial needs, which should include paying down debt, saving for a rainy day and retirement. Pay yourself first by setting up an online interest bearing account; establish a 401(k) through your employer and/or an individual retirement account or IRA. Check out BankingMyWay.com for the best rates around.

4. Protect Your Gizmos and Gadgets with Renter’s Insurance.
On the way to owning your own home, you’ll likely be a renter for a little while. For as little as 20 bucks a month—the price of movie and popcorn—protect your laptop, iPhone (AAPL) and new skis in the event of a break-in or fire. Renter’s insurance is sometimes more important than life insurance in your 20s, considering your most prized possession is not yet a dependent child, but your souped-up Apple iPhone.

5. Haggle with Banks and Card Companies.
With interest rates falling and banks desperate for liquidity and reserves, realize that you are in a position to negotiate with credit card companies from Visa (V) to American Express (AXP). Requesting a lower rate works more than 50% of the time. Just make sure you’re not maxed out. Banks extend their lowest rates to borrowers with strong credit scores and credit history.

6. Shop Smart.

Don’t be pressured to live it up like your six-figure salaried boss who’s carrying a Louis Vuitton tote and flipping around in the newest Michael Kors sandals. Instead of going on a shopping spree to Bloomingdale’s– take a trip to your roommate or friend’s closet – it’s free. If you must head to the mall, avoid impulse shopping by doing the following 1) place desired items at the counter for safe-keeping 2) leave the store. 3) walk off the adrenaline and use reason to examine if you still need the items. Can you afford it? Do you want to afford it? Don’t you have a pair of jeans that look exactly the same? Chances are, you won’t care for the items after leaving the store. At the very least, you’ve practiced delaying gratification.

7. Secure Health Care.

Most college students take advantage of their university’s health care plan. But after graduating, too many young adults fail to follow-up on getting health care. In fact, adults aged 19 to 29 are the fastest growing demo without health insurance, totaling 13.7 million in 2006, according a survey by The Commonwealth Group. If your employer doesn’t offer health care benefits, or if you’re not working right away out of college, realize that you have options to get affordable health care. The first path is to mooch off your parents. Through COBRA, children can enroll on their parent’s health care plan up to 36 months after graduation. Or, consider joining an extra-curricular group, such as a trade union or professional organization.

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Catch more of Farnoosh’s advice on Real Simple. Real Life. on TLC, Friday nights at 8 p.m.

 

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