Critical Financial Tips for College Grads

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Irvin G. Schorsch, III, President and Founder of Pennsylvania Capital Management provides advice for college grads to start building a financial foundation. Nine steps grads must take to start on a path to get rich and achieve financial dreams.

An estimated 1.5 million students will graduate from college this year with hopes of landing a job as the U.S. economy continues to recover. It’s likely to still be a tough job market though. Most employers who participated in a recent national survey conducted by the National Association of Colleges and Employers (NACE) characterize the job market for the Class of 2010 as “fair,” saying they’ll cut college graduate hiring by 7 percent. Those who do get hired will likely start off their career with a load of college loans and a paycheck that stretches only so far.

“It can be daunting for many college graduates to make ends meet, much less begin building wealth,” says Irvin G. Schorsch, III, president of Pennsylvania Capital Management. “There are no legitimate get-rich-quick schemes, but there are ways that even those with modest first-job paychecks can begin to build a financial foundation that will ultimately lead to achieving their dreams.” Schorsch offers the following tips to the graduating class of 2010 as the first steps toward “getting rich.”

1. Pay yourself first. You’ve probably heard this before, but it works. From every dollar you earn, 10 to 20 percent should be set aside for liquidity and to start building your wealth. Set up automatic direct deposits directly to your savings account.

2. Get rid of credit card debt. This should be a top priority. The interest you pay on credit cards is typically at much higher rates than most other types of debt. And, the interest you pay is not tax deductible. If possible, always pay more than the minimum payment required.

3. Reduce the cost of debt and bring your cost of borrowing down sequentially. Paying off your debt is an integral part of accumulating wealth. Evaluate your student loans and other financial commitments. Look at the interest rates you are being charged and work toward paying off the ones with the highest rates first.

4. If your new employer offers a 401k plan, you should contribute enough to trigger the full employer matching contribution. This may be the closest you ever get to “free” money and represents an instantaneous double digit to 100% return on your investment.    

5. Design a system to ensure your bills are paid in a timely manner. Set up direct or online payments from your checking account. Even if you have to pay a small amount, it is much better than having delinquent payments on your record.

6. Know your credit score. Call or go online to TransUnion or Experian to get a free credit report. If you have a credit issue, get it resolved. If the information is incorrect, get it corrected. A poor credit score will severely impede your prospects for getting rich.

7. If you own real estate, such as a house or condo, you may be able to convert some of your student loans to a home equity loan. This is one way to shelter your income from taxes, as you may be able to deduct all or part of the interest you pay on this type of loan.

8. Roll up your sleeves and do-it-yourself. Until you can afford to hire a professional financial advisor, make it your mission to become a knowledgeable do-it-yourselfer. Go online to websites of investment services firms like Vanguard or Schwab. Check out discussion boards, blogs and online groups on personal investing and set up searches and RSS feeds to get the latest perspectives on investing.

9. Diversify your savings. Beyond putting money in the bank, make sure you invest in a variety of asset classes to reduce risk and enhance returns. A well-balanced portfolio, regardless of size, will have a mixture of stocks, bonds, cash, real estate and hard assets (such as precious metals and commodities).

Schorsch adds, “A key to building wealth and ‘getting rich’ is being doggedly disciplined – in your spending and your savings. It doesn’t take a whole lot of savings each week or month to build a net worth of $1 million. It takes time.”

About Irvin G. Schorsch, III

Irvin G. Schorsch, III, is President of Pennsylvania Capital Management. In 1995, Schorsch founded Pennsylvania Capital Management with the entrepreneurial vision to build a firm centered on the client first and foremost and helping people crystallize their thinking about the future of their lives and financial goals. Pennsylvania Capital Management provides a wide variety of wealth advisory services. Through its proprietary Strategic Wealth Advisory Process, PCM assists clients in creating and implementing a strategic plan that is uniquely personal and enables them to provide for their family and future generations, retirement, college education, charitable giving, and business succession. Visit http://www.pcmadvisors.com

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