Laid off? Time for Grad School?

So you had a job that you liked (and hopefully not loved) but you, like 9.3 million other Americans, are now jobless. Sitting around in gym shorts sending desperate resumes and cover letters is getting tiring (how many times can you hear the words “hiring” and “freeze” next to each other?), and you’ve always dreamed of being a therapist or photographer or just getting an MBA so you can tell your former Ivy League colleagues to shove it. Should the crappy economy drive you to get a Master’s Degree?

First consider my story: I got a fine degree in the liberal arts. You know the kind, practical, career-oriented and… other buzz words that I am not finding in Nietzsche’s Collected Works. Despite how well prepared I was for the real world (snark!), I decided to go back to school for journalism. After some time in the Illinois corn fields, I had a snazzy master’s degree. But, wait, no one cared about a degree in journalism. And because the “advanced professional” degree basically crammed a four-year program into one, I had the same classes and teachers as students four or five years younger than me, but no internships—those things that get your foot in the door. In fact, on more than a few interviews, I was told that the degree kept me from getting potential jobs because employers were afraid that I’d ask for more money. (And trust me, I’d be doing the same grunt work as a not-yet-jaded 21-year-old.) Ouch.

Some degrees are just a very expensive way of boosting your personal morale when there’s a scary gray area in life—and convenient patch in a university’s bleeding budget–and some are actually empowering career moves. Before you move to the cornfields, please, please do these three things:

Do a cost/benefit analysis

The Council of Graduate Schools sings a pretty convincing tune in its publication Why Should I Get a Masters Degree. The number of degrees awarded in 2007 was up 43 percent over a decade earlier. (Please note that the latest data available is generally for 2007 and 2008, the 2009 school year doesn’t have much released data yet.) According to the publication, a person with a grad degree earns on average $10,000 more per year. He also moves up faster in his career and is more likely to be employed. (The Council also argues, nonsensically, that getting a graduate degree can actually improve your health—in fact, there is a correlation between education and health, but correlation is not causality. Thank you, liberal arts degree, for something useful!) And, yes, the Bureau of Labor Stats agrees, education pays.

The average yearly cost for postgraduate study towards a master’s is $21,900 for a public school and $34,100 for a private one, according to the Department of Education. That is up 60 percent in just one decade. And those numbers are ballooning even more now. A graduate degree at the University of California, Berkeley: $26,000 per year in fees in tuition, plus $1,170 added on after the recent budget catastrophe, bringing just tuition to $27,170 per year of study. Multiply by two, and add about $8,000 to $10,000 per year for living costs. Your loan = $74,340.

That sounds well and good, but there are some degrees that just don’t pay off in the workplace, and some that do. Andrea J. Koncz, Employment Information Manager at National Association of Colleges and Employers, brings up a few professions that do show major pay increases:

Bachelor’s Degree Computer Science – $61,467
Master’s Degree Computer Science – $68,627
 
Bachelor’s Degree Electrical Engineering – $60,509 
Master’s Degree Electrical Engineering – $70,921
 
Bachelor’s Degree Mechanical Engineering – $59,222
Master’s Degree Mechanical Engineering – $66,961

Cartooning? Editing? Sports announcing? Check salary.com, and be prepared for the worst.

Understand that it’s now more competitive, especially at the cheaper schools

Grad school applicants always rise in a poor economy; The Council of Graduate Schools reports that applicants were up 4.8 percent in 2008, after being up 8 percent in 2007. This trend is making it harder to get into school because of the increased competition.

Because of the economy, people are also going after the perceived value of public schools. Public schools were almost twice as likely as private schools to report increases in enrollment for 2009-10 (47 percent vs. 26 percent).
So, basically, you might be looking at as tough of a market for school as for jobs. Even if you are willing to invest despite skyrocketing costs, you may not even you your foot in the door, so best to apply to many schools.

Know the difference between wishful thinking and inspired thinking

If you always had a dream to do something, and you’ve got the excuse and time to finally do it, wonderful. The blog Unemploymentality brings up a good point if you are feeling blindly for that inspiration, though. They says that if you claim the maximum amount of unemployment, you’ll clock in around $21,060 per year, while the average grad student stipend is $18,779. You’ll be counting less change as a couch surfer. Another ouch.

And more to the point, buying into yet another dream that graduate school is selling you could just be deferring the problem of unemployment another year or six, all the while acquiring more and more debt. A great article from the Chronicle of Higher Education suggests that you bite the bullet and get some kind of experience, even if it is in a field that you think is “above” your education. All experience leads somewhere and teaches important skills, even if they aren’t the ones you think you need.

At least one self-made woman and career advisor, Penelope Trunk, advises to stay away from graduate school. She says it forces you to overinvest in something while the reward is just too risky. Trunk says, you’re better off working on a chicken farm. Literally.

We’ve partnered with CollegeScholarships.org to bring you this infographic which shows you exactly what that degree may be worth and whether it will make economic sense in the long run.

For more personal finance visualizations see: WallStats.com

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It’s not surprising that you didn’t realize what you were getting into with your student loan. You were just barely out of your teen years when you signed the paperwork. If you’re like most people, you probably had little understanding of what it means to incur debt and were lulled into a false sense of security with the knowledge that payments will be deferred for years to come. The language can throw you too. What’s the difference between a subsidized and an unsubsidized loan? What about federal vs private loans?, and so on. This lack of understanding can make you the victim of predatory interest rates from private student loan providers. But walking away from your student loan isn’t the same thing as walking away from your home loans. You’d better be aware of the consequences before you decide not to pay.

Put simply, the only way to absolve yourself of your responsibility to pay back your student loan is to die, or to become unable to work due to a serious disability.

From the government’s perspective, defaulting on an obligation to pay back a student loan, which in the case of federal loans, is lent with taxpayers’ dollars is almost as serious as not paying your taxes. While it’s not a federal offense to fail to repay these loans, the government, and government-approved student loan companies have ways of getting money that is owed. That said, what can you do when the debt seems to be too much to bear?

Student Loan Consolidation and Refinance

Federal student loans are locked in based on current rates at the time of each disbursement. This can vary when the loan documents are signed. Private loans typically have a higher rate, and are usually tied to an index such as the Prime Rate or Treasury averages, much like a credit card. These are typically locked in at a fixed rate, and also vary depending on what federal rates are in place.

As a result of loans being disbursed each semester, many students will find themselves with multiple loans at multiple rates. For students wishing to consolidate their loans, they must apply for this with each lender. This will generally result in say, four loans, with varying interest rates, being consolidated into one amount with a common rate.

Refinancing typically means reduced monthly payments with a longer repayment period – usually at a lower interest rate. If you have federal student loans, and private loans, the interest rates will most likely vary greatly, and must be refinanced separately as you cannot combine your federal student loan debt with private student loans. To get the best rate with either type, make sure your credit is in good shape before applying. Your credit will be referenced, and will play a role in refinancing at a preferred rate.

Deferment

Deferring the repayment of loans is typically granted for a number of valid reasons. This postpones the repayment of principal for a specific period of time. This is typically for people who continue to be enrolled in school, disabled students that are undergoing some type of rehabilitation, or those individuals that have left school and are either unemployed, or able to display a marked financial hardship. For subsidized loans, no interest accrues during this time. For private loans, interest will accrue and will be recapitalized (added to the loan balance), thus increasing the size of the loan.

Forbearance

Those without an approved reason for deferment, but are still unable or unwilling to pay, they may be granted forbearance. During this period, payments can be postponed or reduced, but interest will continue to accrue. Interest is not subsidized during a forbearance, as it’s viewed as a voluntary postponement by the debtor. As a result you are responsible for the additional interest accrued while payments to the principal are not being made and it’s added to the loan balance. These are typically granted in twelve month intervals, but can be made in shorter ones such as three or six month intervals.

Alternate Payment Options

As with any debt, there are always options based on an individual’s specific circumstances. Federal lenders are typically easier to work with than private lenders, but there are always options. For the former the options include: extended repayment, graduated repayment, income sensitive repayment, income contingent repayment, and income-based repayment. For more information on these options it’s best to contact your lender and ask about what they can do for you. As with a deferment or forbearance, it is extremely important to contact your lender to discuss this option while your account is in good standing. Should you allow your account to go into default, many of the above options will cease to be available.

Declaring Bankruptcy?

Nope. In nearly every circumstance, student loans are non-dischargeable. Walking away from student loans is not like walking away from a credit card, mortgage or car loan.

So, What are the Consequences?

Collections

Like any substantial debt, the companies you borrowed from will hound you if you stop paying. Then your account will probably be sent to collections. They will call, send letters, and in many cases start contacting your family if you fail to respond to their attempts. If you were a minor when applying for your student loans and your parents co-signed for you, then they can start calling them as well and put pressure on them to make your payments. Additionally, if your account goes to a collections agency, you will be liable for any legal and court costs associated with collection attempts.

Lawsuits

This is more common with private lenders, but students that default on their student loans may be sued for the full amount of their debt owed. Courts will typically enforce this via wage garnishments.

Job Hunting

These days, many companies run a background and credit check during the application process. This is increasingly popular for positions that require even a modest level of responsibility, especially financial responsibility. While bad credit is not always enough to bar getting hired, having defaulted on student loans is typically a red flag. In short, it can communicate a lot to an employer about an applicants’ ethics and track record.

Default Interest Rates

If you neglect to pay your student loans, you will accrue penalties, fees and interest. Your account will eventually adjust to a default rate, and it will continue to accrue interest until action is taken. The process and rates for each type of loan varies. For more information visit the Federal Financial Aid website

Damaged Credit

Going thirty days past due on your student loans will have a negative impact on your credit. So, you can imagine that walking away from your student loans will carry far greater consequences. Most estimate the credit impact of defaulting on student loans to be similar to the hit for a real-estate foreclosure. While debtors’ prisons have not existed for over a century here in the US, defaulting can haunt you and your credit report for around a decade. To make matters worse, if you had a co-signer on your loans, their credit will be similarly affected, unless they make the payments for you. This, of course, could then put a huge strain on personal relationships.

Wage Garnishments

Here’s the biggest difference between other debts (mortgage, auto, and credit cards, for example) and student loan debt: if you fail to pay your student loans, your lender can garnish your wages. Many people move abroad as an attempt to avoid repaying their student loans. For those with an excess of $100k, this can make sense at first. If you move to the EU and find employment there, and pay taxes there, there is no way the US government can garnish these foreign-based earnings. The problem is, if you want to return to the US and work one day, you’ll return to the unsavory reality of a much higher balance – due to accrued fees, penalties and compounded interest – and very likely, a wage garnishment.

It wasn’t until he graduated college in May 2008 that my friend Ben realized the depth of his student loans: $40,000 owed upon completion of a liberal arts bachelors degree. Like many students, he didn’t worry too much about the numbers as he signed loan papers at the start of each semester. The debt totals and their corresponding monthly payments, due some time in the future, weren’t overly concerning at the time.

In the past ten years, debt levels for college graduates have more than doubled. In 1993, the average graduating student who had loans owed $9,250. Contrast that to 2004, when the average indebted student carried $19,200 in college loans. While less than 50% of four-year college grads had college debt in 1993, by 2004 that number has increased to 66%.

One of the main factors contributing to this rise is the decrease in public money available for colleges in the wake of the financial crisis. As state and local budgets tighten, colleges and universities often lose a portion of their funding, and this shortfall is passed on to students, who with their parents must bridge the gap with larger and larger loans.

Ben is not alone when it comes to higher-than-average college debt. At private non-profit colleges, like the one Ben attended, over 73% of graduating seniors carry student loans. Of those, a full 10% have loans in excess of $40,000. These high levels of debt are problematic for those entering the workforce and beginning their careers. Instead of being able to save money and invest enough for their future, let alone save for their own children’s educations, they are spending hundreds of dollars each month on loan payments.

Large debts likewise prevent college graduates from furthering their education. More than 40% of college grads who choose not to pursue a Master’s degree or doctorate cite college debt levels as a primary reason. Faced with tens of thousands of dollars in debt, many decide that enough is enough.

Rising student debt has a hidden cost to society: talented graduates forgoing good but lesser-paying jobs, in order to make enough to pay back what they owe. Faced with large monthly debt payments, Ben decided to work as a salesman where he’d make more money than in the other positions he considered-and even preferred.

“Student debt has a major impact on what careers young people choose. Large college loan payments discourage students from rewarding, albeit low-paying, sectors such as teaching or public service, that they would otherwise consider,”  said Edie Irons, communications director at the Project on Student Debt.

In 2002, a full 54% of former students reported that they would have borrowed less money for college if they had it to do over again. While it is little consolation to those already deeply in debt, students starting their college careers can find ways to limit their student debt loads as much as possible. Irons does not see debt-free college as realistic for most average American families, but believes the average amount of debt should and can be less than it is. To that end, it’s important that prospective college students seek as much grant money and private scholarships as possible, before relying solely on loans that need to be repaid.

Students should meet with financial aid officers and career development personnel to get a realistic view of how much debt they will incur while attaining their degrees, and how much they will likely earn when beginning their chosen professions. An accurate projection of their financial picture upon graduation can help students make better financial decisions while in school. Financial counseling for students needs overall improvement, as scores of students leave their alma mater with credit card balances and expensive car loans in addition to education debt.

In an effort to ensure that student loans don’t hurt more than they help, the Project on Student Debt works to identify and develop solutions for those burdened with unmanageable college debt. Income-Based Repayment is one of these.

Under a new federal loan repayment plan based on a model developed by the Project, students with federal loans are guaranteed  that their monthly student loan payments won’t exceed a certain percentage of their income (15% of discretionary income, which is classified as everything over 150% of the federal poverty level). This legislation, signed into law a year ago, takes effect  in July 2009 and applies to all federal student loans, past or present.

“Income-based repayment is important because it provides a guarantee that if a student makes a bad calculation and borrows more than he’s able to afford, there’s a reasonable safety net. It’s not a free pass. They still owe the money and have to pay it back, but this makes it affordable,” said Irons.

Loan forgiveness programs for those working in the public sector or for charitable non-profits are also underway. Ten years of qualified employment as well as loan payments are required for an applicant’s remaining debt to be erased. Irons believes that this incentive will encourage more jobs in fields such as teaching, law enforcement and state and local governing.

While many students and former students will benefit from the new legislation, Ben won’t be one of them. His student debt is primarily private loans through his college, and the legislation applies only to federal student loans. A full 80% of student loans are from government sources, and private college loans makes up the other 20%. For students with private debt, benefits such as loan deferment and forbearance are not guaranteed by the government. Their interest rates are also usually higher, translating into larger payments.

For Ben, the reality of a $40,000 debt has just begun to sink in.

In this time of economic uncertainty many are putting off a major purchase such as buying a car. Why incur even more debt? But while the high price of gasoline might dissuade you from purchasing a gas guzzling sport utility vehicle (SUV), you probably don’t have the luxury of giving up driving entirely.

So if you are in the market for a new car, you’ll need to deal with the fact that it is harder than ever to get a loan. In better times, the major automobile manufacturers established their own financing to help people buy a car without having to leave the lot. These services typically don’t offer the best rates, but their threshold for extending credit has typically been lower than actual banks.

What many don’t realize is GMAC Financial Services and Ford Credit, are not only the largest companies dedicated to automotive financing but in fact are large financial institutions that process more credit than many banks.

Dealers have long provided a number of financing options. While those options haven’t gone away in the current financial crisis, the financing arms of the major automobile manufacturers are being more careful than before in providing credit.

GMAC Financial Services has responded to the instability of the global capital and credit markets by implementing a “more conservative purchase policy for consumer auto financing,” according to a recent press release.

Among the changes – you will now need a credit score of 700 or above to even qualify for a car loan from GMAC. Credit scores typically range between 300-500, meaning that many people who need a car won’t be able to get financing.

Before you even venture on to the lot, you should know your credit score. If you don’t know what it is, you’d better find out now. You’ll want to make sure it is both up-to-date and accurate. Try a service such as FreeCreditReport ($12.95/month for credit score and monitoring) or myFico (all three FICO scores and credit reports).

GM dealers are paying more to provide financing (an increase of 75 basis points) so they are going to be a lot more careful about who they are providing credit to and how much credit they are providing. Those shrill cries of “no down payment required,” are quickly becoming a thing of the past. GM customers can no longer borrow in excess of the dealer’s invoice price so must pony up 10% down on the purchase of a new vehicle. New limitations on loan terms are also making it more difficult to buy a car (60 months is typical).

If you have a high enough credit score, you may want to consider shopping around for the best car loan you can find rather than taking the dealer up on the factory financing. See this how-to video to learn how to find a great deal on a car loan. Just remember, you better get dealing before you can get wheeling.

Don’t wait until you are too old to scale the steps of Chichen Itza to travel. The best time to see the world is when you are young. But if travel seems beyond your means or beyond your budget, you’re going to have to get creative before you get going. Are you in a rut because your current job doesn’t take advantage of your skills? Identify those skills and they can be your passport to a world of adventure.

Techie? Wire a village.

If you have a computer or technology skill set, there may be a non-profit organization that needs you to set up a network for a school system or provide farmers with an internet hook-up, allowing them to search the Wikipedia for farming techniques or shop for better grain prices-in the Amazon jungle or the African plains. Consider getting involved with One Laptop Per Child, a non-profit whose mission is to develop a $100 laptop that could revolutionize how we educate the world’s children. Organizations like Oxfam and Care, plus countless smaller non-profits, are empowering local communities with technology, an effort that can help bridge the digital divide while opening your eyes to the way other cultures work and play. Think of it as the 21st century version of volunteering for the Peace Corps. Check out sites like idealist.org for ideas.

Into Politics or Communications? Staff an embassy.

Our State Department zips sharp-witted Foreign Service Officers and Foreign Service Specialists all over the globe to staff our embassies. These seldom-heralded positions have wonderful perks-diplomatic immunity, anyone?—if you can stand the wait. (The notorious red tape of the State Department and up to one year of training makes this more of a long-term commitment.) The posts, usually two years long, could be in literally any part the world and span a range of fields, from public relations to diplomacy to economics. Speaking a foreign language, particularly an obscure or difficult one, gives you a leg up.

Foodie? Work it on a farm.

Worldwide Opportunities on Organic Farms (WWOOF) can bring you closer to mother earth by placing you at an organic farm where you can learn about organic lifestyles and share more sustainable ways of living. In exchange for a few educational weeks or months living a simple, natural, and-read this–physically challenging life, your host farm will give you room and board. WWOOF is a worldwide network of global farms. Perhaps you’ll find yourself on a rare tropical flora garden that opens to the ocean in Central America or in the tangled olive vines of the Turkish countryside or picking berries in Sweden. There’s a fee to join WWOOF but the terms of the contract are largely left up to the farm and individual, so shop around.

Finance or accounting? Go multinational.

Rather than fear our impending globalization, why not embrace it? Big Brother has a plane ticket for you. Many multinationals know that savvy young things like you want an international career, so they are starting to use their worldliness as an asset. For example, behemoth Price Waterhouse Coopers’ has the EPIC “International Challenge,” which lets you set up an international assignment in your early years with the company-while you’re young and adventurous.

Writer or language junkie? Teaching is a great gig.

As a teacher in rural Japan, I never got over the fact that people were awestruck with me for simply speaking my mother tongue. If you think linguistically, teaching the world’s second language is an enormously lucrative way to travel. But first you will be battered with acronyms; TOEFL, CELTA or TESL teaching certificates are smart ways to give yourself street cred. The foreign teaching community relies on forums and chat rooms to stay connected while on far-flung assignments, which means you can tap into their network easily. Dave’s ESL café will get you started.

Working in another country is a fantastic way to see how your skills can translate into real world opportunities. Follow your bliss and the rest will follow.

Credit cards are hailed as convenient tools, a way to build credit and earn points or rebates. However, there is another side to credit card spending, experienced by many who pay less then their balance month after month and one that can lead to a downward spiral that is difficult to rebound from.

Generations X and Y, those aged from 14-42 are being hit the hardest. Unlike their Baby Boomer parents, they are more likely to start off their working careers already in debt. While student loans and other education related debt make up a great chunk of that for many, credit card debt is also quite high and on the rise for young people-some high-school students even have their own credit cards, something unheard of a generation ago.

So with all that money going to iPhones, PSPs, and the latest designer duds, is this generation just plain spoiled? Not so fast grandpa. Many in this generation are broke-or close to it-but the blame came be placed squarely on starting out in debt and having to struggle with high-interest rates, not on extravagant living.

According to personal finance counselor Sophia Jackson, credit card debt is an epidemic among the under-30 crowd. College students average $2,200 in balances on their plastic, says Bankrate.com. Graduate students have more than double that amount, and high interest rates translate into hefty monthly payments and long-term balances for many.

The bottom line is that most teens and young adults just don’t have the life experience needed to comprehend the implications of paying back their loans or debts when they take them on. And let’s get real for a minute, how can a 19-year-old student be expected to grok the reality of paying back thousands of dollars in college expenses when he’s buying books, food and clothes, excited about the upcoming semester, sports and college life? The numbers don’t have much basis in reality, and it’s a natural assumption to think you’ll be able to pay off the balances as soon as you graduate and land a high-paying job. Combine this with the fact that college teaches you nothing about personal finance and you’re facing a financial mess right at the start of your adult life.

Many will pay minimum payments on their loans for years, either not realizing how much is going to interest just to service the debt or simply not having anything extra to throw at the principal. With young credit, new credit or no credit, interest rates are often in the high double digits, lowering the chance of fast repayment.

Ironically, low credit scores from high debt-to-income ratios, high credit card balances and missed or late payments can affect your job and income potential. Many employers do routine credit screenings and background checks on applicants; security clearances are also in jeopardy for those with bad credit.

A weak economy further impacts your ability to repay loans. When high-paying jobs are scarce, many find themselves jobless for short periods or working lower-paying jobs than they expected. Without lifetime savings or investments, the younger generation falls into the trap of adding on more credit card debt or, at best, is only able to pay minimums on current debt and not get ahead of their bills.

Sounds pretty grim. But there is hope. The best solution is for Generation X to avoid new debt and pay off old debt as aggressively as possible, and for Generation Y to avoid the debt trap at all costs. It would be wise to put off credit card use at least until entering the workforce and becoming more familiar with personal finance, basic budgeting and personal accounting.

The young who are able to invest for retirement, rather than simply service their debts, will be in the best position for financial success. Invest what you can now, even as little as $100 a month will likely return huge dividends when you retire.

A basic understanding of personal finance, debt management, budget management and accounting will go a long way toward helping you avoid the debt trap. Learn how to manage your money and you may even leave a legacy for those generations to come.

Mint Tip: Pay your credit cards in full each month:
The average American carries $8,500 in credit card debt. At a minimum payment of $100/mo, it takes 6.7 years, and $4,257 in finance charges before you’re in the clear.

Here are the raw stats:

Every business reports your financial management activities to the three major credit bureaus—Experian, TransUnion, Equifax. Your financial activities dictate your FICO (Fair Isaac Corporation) score, ranging from 300 (worst) to 850 (best), and this is what lenders, landlords and employers use to determine your credit risk. The lower the score the more likely you’ll be considered a risk. It also dictates interest rates. A low score can mean thousands more in interest payments, as you can see in this table:

Here’s how FICO scores affect rates based on a 3-year auto loan for $15,000.*

*from myfico.com

Your credit history can haunt you for the rest of your life so it’s a good idea to follow this easy three-step-plan to build, maintain and (if you must) repair your credit.

#1 Build Your Credit

Open Checking/Savings Accounts: You can open an account for as little as $10 at some banks. The ability to maintain your accounts will show lenders that you can reliably handle money. Opening an account is particularly beneficial for those who haven’t already established credit. Bounced checks mess up your credit report, so use that check-writing feature wisely!

Apply for a credit card: Part of your debt planning should include determining what type of credit cards you should sign up for. Get a credit card with low interest rates (not just intro rates), no annual fees, and a generous grace period. Try not to carry a balance so you don’t end up paying interest. Retailer cards are easy to get but have high interest and worse penalties, so only get one if you’re able to pay in full each month. Secured cards require a deposit, which becomes your limit. Be careful about missed payments as they come out of that deposit. Be aware that secured cards also have high interest rates.

Don’t get lots of credit at once: When you get credit, it goes on your report so if you open many accounts at once, they drag down scores and worry lenders. Even applications stay on your report for two years. If you need more than one card, wait six months before opening another. Wise financial management practices dictate that you use your first card responsibly, especially during the first six months; doing so will allow you to get better rates on future cards.

Piggyback on someone’s credit: If family members with established credit add you to their credit cards, your credit will reflect upon theirs. Conversely, so-so or bad credit from your family members may be something you’ll inherit as well, if you sign on as additional members and users of their credit cards.   Also, if they co-sign a loan with you and you default, you’ll be impacting their credit, so be careful. 

#2 Maintain Your Credit

Get Your Credit Report: Use annualcreditreport.com to get all three reports once a year for free. If you find mistakes, immediately contact the credit agencies since discrepancies stay until you take care of them. If your report is bad due to debt, start working on repairing your report. Avoid companies that offer to fix your credit:  many are reputed to be rip-offs and have been reported to use illegal practices. The only way to improve credit is to pay debts and dispute false charges.

Mint Tip: If there are unauthorized charges and you suspect identity theft, immediately visit the Federal Trade Commission Identity Theft Site.

Get Your Credit Score: Although you can receive credit reports for free, it’s not typically the case with credit scores. Credit scores cost $15.95 at annualcreditreport.com or myfico.com. Cheaper sites calculate their own scores, and are often inaccurate. Just like credit reports, you have three scores. Check all of them if you’re making a major purchase. You don’t want to get caught off guard if the lender checks one that you weren’t able to review beforehand.  Recently, a new service called CreditKarma.com was launched to provide free credit scores to the public. The downside?  You’ll have to supply your personal information to this new company before you’re able to review your scores.

Don’t close old accounts: Once you’ve paid off your credit card accounts, don’t close them off!  Older accounts will show that you have long-lasting credit history, and this will indicate that you have financial stability. If you close your available credit, it’ll raise your debt-to-credit ratio. 

#3 Repair Your Credit

Pay in full every month: If you carry a balance, you’ll pay interest. If you’re unable to pay in full, pay at least the minimum on all debts. Paying at least the minimum will improve your credit history and score, which will give you leverage for lowering your interest rates.

Pay on time: Late payments mess up your report for years. It can also raise interest rates. Any late payments you make on any one bill will affect the interest rates you have across all your credit accounts. If you have trouble remembering due dates, have Mint remind you when bills are due and set up auto-bill pay online through your bank.

Lower your debt-to-credit ratio: Your debt-to-credit-ratio is what you owe versus how much credit you have. If you owe $5,000 and have $10,000 in credit, your ratio is 50%. The lower the ratio, the better. Aim for a ratio that’s less than 30%. A quick way to lower it is to increase your credit line; but, don’t spend more just because you happen to acquire more credit.

Related Mint Tips:

Financial Planning Software
Financial Planner
Personal Finance Tool
Personal Financial Tracking

Career Planning

During these tough economic times, you may find that the only work you can land is temporary, but don’t despair: Suze Orman worked as a waitress for 7 years before becoming a renowned financial management guru.

Mint Tip: For great web sites to aid you on your job search, you can visit Craigslist, Indeed.com, Simplyhired, or Yahoo!HotJobs.  And continue to tap your school’s career center for potential employment leads.

Moving and Housing

If you do move, get your friends and family’s help to keep moving costs down.  And you’ll likely want to find a roommate to keep your monthly rental costs down, too.  You can connect with potential roommates through online sites such as Craigslist, roommatelocator.com, roommates.com, metroroommates.com, roompals.com, and roomster.net, just to name a few.

Food

Restaurant food costs more than home cooking.  To help you plan your healthy and cheap meals at home, you can check out Amazon.com for a few highly rated cookbooks and recipe books like “Cheap and Easy Cooking; Cheap, Fast & Easy Cookbook” and “Cheap.Fast.Good!”   Join your local CostCo or Sam’s Club, use coupons at local grocery stores, plan out your meals carefully and be creative with your leftovers.  This is one area of your personal budget where spending some time can save you significant money.

Transportation

Avoid buying a car unless it becomes absolutely necessary, as monthly car payments, insurance and maintenance costs can weigh heavily on a tight budget. Public transportation is not only good for your bottom line, it’s also great for the environment.  Or use a car sharing program such as Zipcar.com, which allows you to rent a vehicle on an hourly or daily basis. Finally, if it turns out that you’ll really need to own and drive a car, then buy used. New cars depreciate rapidly and many people end up owing more on their car than it’s worth.  Check out our car buying advice in:  Young Professional’s Car Buying Guide. Have you faced some financial challenges we haven’t covered here? Anyone find other sites or tips helpful in making ends meet as a new grad? Share here…readers (and Mint employees not that long out of school ourselves) will thank you! Related Mint Tips: Personal Financial Planning Online Financial Planner Online Personal Financial Tracking Personal Financial Advisors

I left both home and college at 19, for a summer job in California with an internet start up. That was the summer of 2000, during the dot-com boom, and apartments were scarce. I paid $1,700 a month for a one-bedroom – which was hard to afford at a $21/hour job, I can tell you. It wasn’t until I got to the apartment that I realized: I have no furniture, no power, no connection to the outside world. Just a roof over my head. I don’t think I’d really appreciated how many things my parents had taken care of, and paid for, until that day.

I learned from that experience, and frankly it was the catalyst to my building Mint.com. My best tip?  When you make the decision to move out, put together a very simple personal budget that lists all of your one-time expenses. Whether you’ll be paying 100% of these costs, or sharing them among roommates, everyone should plan for:

• Moving Costs, including your U-Haul rental, and either gas or car transport charges
• Security deposit for your apartment
• Rental deposit
• First month’s rent
• Phone, Cable and Internet setup and installation
• Household basics like: cleaning supplies, pots and pans, dishes, etc., etc.”

Mint tip: Learn from my mistakes and prepare for your first paycheck to take several weeks to process. It took two weeks to get my first one, and then another week for it to clear. That delay, combined with all the unexpected expenses of living on my own, led to my first – and thankfully only -overdraft.

Once you’ve managed the move, start off on the right foot. Money management doesn’t have to be complicated and time-consuming. In my experience, everything you need to know and do can be summarized in about 3,000 words – not much bigger than a good term paper. Check out my Three Principles of Personal Finance post and see if you agree. Here are the parts that are probably most relevant to you now:

• Keep it simple. Setting a simple budget for just 3 – 4 discretionary expenses like restaurants, shopping, books, and entertainment makes it a sustainable change. Remember to budget for that monthly student loan payment, as well.
• Make it easy to keep your money organized. Open new accounts with banks offering the best online service you can find. If you also have accounts at school or at home, and a student loan, consider using an online service that automatically collects and analyzes all your accounts on one site. BTW, we’re adding student loan tracking to Mint.com next month.
• Know where your money goes. Often, people fall behind in managing their finances because the combination of a new job, new place and new friends keeps them too busy to collect and total all your receipts each month. To stay ahead of the curve, use a paid or free service that will do the work for you — categorizing and analyzing expenses to save time and money.
• Put your money to work for you. If you’re able to start saving now, put those dollars into your company’s 401K (if they offer a pre-tax, matching funds program) or a high yield savings account.
• Prepare for the unexpected. Get renter’s insurance. Its inexpensive protection and likely the only insurance appropriate for you at this stage in life.

Mint tip: One of our most popular features is the one I wanted most when I got out of school, but couldn’t find at any bank: text messaging. Mint.com can send SMS text messages to alert you to bills due, credit limits, and bank fees in any of your accounts. It’s like adding a mobile interface to all your banks. You’ll soon be able to send text messages to Mint, to check bank balances from your phone.

Even though money is tight when you’re young, it shouldn’t be the focus of your entire life. You can avoid money stress and surprises by using smart budgeting and money management tools. If you start managing your money well in your 20’s, you’ll be able to do more with your life, have more time for things that really matter and rest easy knowing that you’re prepared for the unexpected. Money is really just a tool for living well.
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