• On average, post-graduate salaries have declined. In 2004, 24- to 35 year-old male college graduates made $1,223 less in 2004 than he did in 1974, when adjusted for inflation.
   

• The price of health-care coverage has increased, while benefits have been reduced.
   

• Job security has bitten the dust, often leading to interruption in loan payback.
   

But … on the positive side, according to Job Outlook 2008, college graduates face the healthiest job market in three years, with employers planning to hire 16% more of them than made the cut last year. And in the National Association of Colleges and Employers' surveyed, nearly 58% reported they are increasing the number of graduates they are hiring, 36.5% are maintaining last year's level and less than 6% said they were cutting back.

Eighty-percent of employers intend to increase starting salaries by 4.6% for candidates with bachelor's degrees and 5.2% for master's degrees.

Student loans aren't the only problem

That will surely help because in addition to the student loan debt hanging over their heads, many graduates also are in hock to the credit card industry. And not all of this debt can be attributed to "having a good time." Instead, the majority of it has been spent on books, tuition and other necessities.

According to Nellie Mae, the average undergraduate has credit card balances of $2,700, which if paid back at the minimum rate, would take almost two decades to erase! Unfortunately, as students progress through college, those balances also grow. Almost 25% of students owe more than $3,000 and some 10% have outstanding credit card debt of more than $7,000.

And it just gets worse. The average 25- to 34-year-old owes more than $4,300 on his credit cards.

We're not done yet! Once you add student loans, credit card debt and even auto loans, the Federal Reserve calculates that almost a quarter of every dollar this age group makes goes toward paying their consumer debts.

This is a tough way to start out a new life. As a consequence, graduates have little savings. Additionally, many parents have limited means to assist in actually helping them embark upon their new, after-college life. Apartment rent, transportation, utility deposits, furniture (plus all of the hundreds of dollars needed to buy household essentials) will put a big dent in that graduation money so generously donated by friends and relatives.

I can personally attest to this, as my partner's son just graduated from college and moved west. He was lucky; he doesn't yet have a job, but he does have a big-hearted father who came to his aid when his son had his "oh, my gosh" moment, realizing that U-Haul actually cost money to rent and that his new landlord wouldn't let him move in without first, last and security. We were all young once!

But these debts don't just have short-term consequences. They will create a huge obstacle when graduates want to buy their first homes, but even worse — it will be all but impossible for them to begin funding an investing and retirement program.

What can a graduate do to ensure future financial stability?

Of course, a little planning at an early age by both parents and future graduates can make a real difference. But for most of us, our planning (as my dad was fond of saying) takes place "after the horse is out of the barn." Nevertheless, there are some practical steps you can take that will make your graduate's (and your) financial life less stressful and more satisfying.

Establish a budget. This probably won't be easy, because your graduate is most likely going to be making more money than any of his college jobs have paid him, and he is going to want to spend it! So, your task will be challenging. But you must make sure that he not only creates a budget, but that he is accountable for it.

Budget for more-than-required student loan repayments.

Create a plan to pay off credit card debt (and not just the minimum payment).

Plan to save. No matter how much or little your graduate is earning, extract a promise to save a certain percentage. Then target six months of living expenses as the goal for his initial savings.

If available, make sure your graduate fully participates in his firm's 401(k) or other retirement program. You may have to explain the benefits of compounding and the "free" money matched by his employer, but you must emphasize the importance of this. Also, strongly suggest that a percentage of any raises the graduate receives should be allocated to this account.

Open an IRA at a discount brokerage. Even if funded with only $5 per week, this account will be an essential part of your graduate's future financial success.

Suggest any monetary gifts be used to first pay down student loan and credit card debt, then invest.

We all need a financial safety net, but it is absolutely critical that the building blocks of such a net are established for the just-graduated who haven't necessarily had the life experience — or coping expertise — of their elders. This net not only serves the purpose of paying expected and unexpected expenses, but also helps prevent those financial obligations from creating worry and depression that will ultimately adversely affect the newly-employed's (hopefully) job performance.

Additionally, a strategy for savings and investing will help create a lifetime pattern of good financial decisions. The young — and sometimes the not-so-young — think they have plenty of years for making up for bad early decisions. But unfortunately, time does fly, and the earlier folks develop a financial plan, the better their entire lives will be.
 

This concludes this week's issue of Financially Fit.  We encourage you to visit our website to review past issues of Financially Fit:

http://www.brokeradviser.com/newsletter.cfm


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