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After graduation, target your financial education

Recent college graduates are holding newly minted diplomas that say they mastered college. Now it's time for grads to master their financial life.

A few rules of thumb will help. You might not like the limits, but if you start adopting them immediately, the controls on your spending will give you more money for the later phases of life.

Spending on student loans. Your monthly payments shouldn't exceed 8 percent of your monthly pay from your job.

Unfortunately, no one probably told you that before you took out the loans. If you are just learning now that your student loan monthly payments are going to be too high for your income, you may have options. The federal government allows graduates to keep their federal student loan payments manageable. If your first job pays so little that you can't afford the loan payments, the government will adjust your payments lower based on a formula you can examine here: What you don't pay gets tagged on to your loan for later.

Also, if you have no job yet, ask for a deferment or forbearance to temporarily delay your loan payments.

Learn more at

If you don't have a job yet and take one that serves society, you can get relief on your loans. See

Spending on a car. Use no more than 20 percent of your monthly income for car payments and related expenses like insurance. Don't solve the issue by extending the car loan to four or five years.

Try this calculator to help see what you can afford:

Spending on housing. Don't spend more than 28 percent of your income on housing. You might stretch to 30 percent if you are buying a home, because in the long run it should appreciate in value and perhaps be an investment for your future. Remember to consider insurance, repairs and property taxes as necessary costs too.

Overspending on rent is a major mistake. You will deprive yourself of the money you need to save for a house purchase in the future, and you might not be able to go out with friends, take trips, go back to school or even afford to take a lower-paying job that will make you happier.

Credit card spending. Whipping out a credit card to cover what you can't afford will dig you into debt and mean you pay over and over again for what you bought in the past instead of being able to buy what you want in the present. Don't charge any more on a credit card than you can pay off each month.

Save. From the start of your working years, devote some of every paycheck to savings. You should have an emergency fund so that if the car needs new tires you don't have to charge them.

If you own a home, you should be saving about $100 to $150 a month for repairs that inevitably pop up. A rule of thumb: In case you lose your job, have three to six months saved to get you through a new job search.

Also, while retirement seems far away, it is essential to save, beginning with your first job, in a 401(k) at work or an IRA if you don't have a retirement savings plan at work. If you save 10 percent of your pay throughout life, you should end up with the money you need for your future.

After graduation, target your financial education

06/01/14 [Last modified: Sunday, June 1, 2014 7:35pm]
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