College costs are soaring, and students are borrowing more, only to enter an uncertain job market with a mountain of debt. What’s a graduate to do? Here are a few financial tips for new college grads wondering how they can chip away at their debt.

Financial Tips

1. Wise up. You’re not done researching yet. Before you can start repaying, you need to figure out who you owe and how much. Your school’s financial aid office can help. The National Student Loan Data System is another valuable resource.
2. Develop a plan. This can be a daunting task, but you need to make a few decisions up front. Do you want to consolidate your loans or not? How soon do you want to pay them back? Can you afford to pay them now?
3. Get help! If the questions in the last tip got your head spinning, it’s probably time to seek some help. There are plenty of online resources to get started. The Broke Grad Student blog has plenty of resources. For a quick overview, check out this rough guide from Get Rich Slowly.

Depending on how much debt you have, paying off loans can be a quite a daunting task. Hopefully these tips are helpful in getting you started.

Is this jackpot finally big enough for you to risk your hard-earned dollar? There is no way you would risk money on a paltry $100 million jackpot. Seriously, who can live on $100 million these days?

But, a $640 million jackpot, you’d be set for life! It’s the American dream and a way to be happy…or is it? Here are some stories from a few lucky lottery winners:

1. William “Bud” Post won $16.2 million in the Pennsylvania lottery in 1988.
He later described the experience as a ‘nightmare’ and wished it had never happened. Who can blame him? He was sued by a former girlfriend eager to get her hands on the cash, and his brother hired a hit man hoping to inherit the winnings. He invested in ill-fated family businesses, and within a year, he was $1m in debt. Today he gets by on social security payments. 

2. Janite Lee won $18m in 1993.
Her generosity in giving money to a variety of political, educational and community causes was commendable. However, just eight years later, she filed for bankruptcy.

3. Jack Whittaker won a record $314.9m Powerball jackpot in 2002.
Life since then has been a long list of arrests, lawsuits, and broken relationships. Whittaker was sued by Caesars Atlantic City casino for bouncing $1.5m worth of checks to cover gambling losses. In 2007, his then wife, Jewell, admitted she wished she had ‘torn up the ticket.’

4. An as-yet-unnamed Sicilian won £79m on the Italian lottery in 2008.
Before he or she could even collect the winnings, consumer groups were demanding the windfall be seized by the government. The winner has since gone into hiding, fearing the Mafia will come calling.

Winning the lottery or inheriting any cash windfall may not be everything you hoped it would be. It is like adding “Miracle Grow” to the way you currently handle finances.

1. Savers will save and invest more
2. Givers will give more
3. Spenders will spend more

Have a financial plan for any cash windfall. It will give you the peace of mind of using the money wisely. As you can see from these past lottery winners, instant riches aren’t the best way to fund your retirement. Luckily, there are more reliable (and safer!) ways to build wealth. I’ll show you using the average amount spent per month by a regular lottery player from age 18 to 65.

Lottery Player                                                Long-term Investor

Monthly lottery tickets: $53.75                     Monthly investment: $53.75

Expense after 47 years: – $30,315               Investment after 47 years: $689,031*

Odds of winning**: 1 in 195,249,054

Good luck!

*10% return compounded monthly (historical stock market return 9.83% 1/1/26 – 12/31/09)

** Per ticket, according to the Powerball website

Confused? The study showed people who pre-screen purchases for price subconsciously ignore the cost and focus instead on quality at the actual point of purchase. Therefore, if confronted with a nicer option, they’re more likely to buy it. And higher quality items cost more, hence the overspending.

To ensure your budget doesn’t get the best of you, check out these financial tips:

Financial Tips

• Switch your thinking. The research shows you should consider an item’s quality and specifications before accessing price. Define what you what, and then budget accordingly.
• Broaden your budget. By micromanaging your budget, you’re probably focusing more on the sacrificed quality than your savings, which might prompt you to overspend. Instead, budget broadly (e.g. dining out, entertainment, household expenses). You’ll achieve the quality you desire and be more likely to stay within your limits.

Check out the full Brigham Young University study to ensure you’re not breaking your budget.

My son is currently interning with COUNTRY Financial while enrolled in the MBA program at Illinois State University. He is a graduate of the University of Iowa in finance. While not completely taking on all of his financial responsibilities at this time, he has learned the importance of budgeting. Living on his own, paying for utilities, gas money and groceries are all items he has to budget his paycheck for.

My daughter graduated from Bradley University three years ago and was hired as a nurse at OSF St. Joseph’s Hospital. She was overwhelmed by all the decisions to make: tax forms, 401(k) contributions, health insurance, etc. On top of this she was paying for her own apartment and taking over her car insurance payments and cell phone bill for the first time. I have to say, I am very proud she has gotten her “affairs in order.” She has put herself on a budget and is sticking to it! She has chosen a path of financial security!

I taught my children that one of the first and most important steps for successfully managing money after college is to understand your expenses. Most graduates have never had to budget so it can be a daunting task. Here are some steps I taught them:

• Create a budget and live within your means
• Make a list of your fixed expenses, such as rent, car payments, utilities and food
  • Avoid the temptation of expensive electronics and limit outings with your friends 
• Make a list of your discretionary expenses such as clothing and entertainment ­– the things you want to spend your hard earned money on!
  • Keep a credit card on hand but do not use it for anything unnecessary

My husband and I use FinanceWorks, a free online tool that connects to and manages your accounts all in one place! You can create your individual budget and set spending limits in any number of categories you choose: food, credit cards, entertainment, etc. The choices are all yours. FinanceWorks automatically categorizes your transactions from your accounts so you can control spending more easily, stay on budget and save more.

Another lesson for my kids was to put a small amount away with each paycheck; this will begin to accumulate over time and provide a much needed cushion. The earlier in your life you begin to save, the better off you will be, both in terms of having savings for big expenses and retirement. Time is your greatest asset when it comes to saving.

With fewer companies offering full pension plans and the uncertainty of Social Security, it has become more important than ever to save and plan for your own retirement. Saving for retirement has become even more attractive with special tax-advantages accounts such as:

• Employer 401(K) plans
• Individual Retirement Accounts
• Special retirement accounts for the self-employed

These accounts allow for tax deductions, credits and even tax-free earnings on some retirement savings.

Teaching our kids to be financially responsible is part of a parent’s job. We hope we gave our kids the information they need to secure promising futures!

[This is a guest post from Marcia Zelnio. She’s an Accounting Assistant at the IAA Credit Union and writes for the IAA Credit Union Blog.]

Financial Tips

1. Eliminate paper. Paper plagues money matters: credit card receipts, bill payments and paper statements from your bank, cable provider, cell phone carrier…the list is endless. So, sign up for paperless statements, pay your bill online or with a mobile app and reject the receipt at the ATM.
2. Avoid checks. Checks waste paper, but luckily, there are many other ways to pay. Send money securely through your bank’s website or mobile app. Or, use the PayPal or Square smartphone app to easily exchange money digitally.
3. Horde your records…in the cloud. Don’t keep mounds of financial documents around your house. Scan and store them online. Try a service like Dropbox or Evernote for cloud storage. Then, shred and recycle all that paper.

Technology has made managing your finances a far more eco-friendly process. Make sure you’re taking advantage of it.

[This post is adapted from David Gallico’s Money Smart Week presentation about saving for both retirement and college]

A savings conundrum

What better investment can we make than to provide our children with a good education? According to the US Bureau of labor Statistics, the earnings for a 25 year old with a bachelor’s degree working full time are about 65 percent greater than those with a high school diploma. Those with a master’s degree earn about double.

On the other hand, saving for retirement is more challenging than ever. For previous generations, retirement was a short period of rest and relaxation after about 40 to 45 years of hard work. What’s changed? Well for one, life expectancies. Living longer means a longer retirement. And that means you need more money.

When you couple the fear of outliving your savings together with inflation, the decline of employer pension plans and the potential for changes in Social Security, the need for retirement planning has never been greater.

My savings journey

With proper planning, your decision doesn’t have to be all or nothing. Ideally you can do both. Unfortunately, many parents ask me about saving for college when their children are sophomores or juniors in high school. For most, that’s too late for serious savings.

As a father of twins, I wish I would’ve started saving earlier. I began a college savings plan for my children, but like many, later in life. Although a small amount, I contributed something each month to that plan. At the same time, I didn’t neglect my 401(k). If your employer offers a 401(k) with a match, even while saving for college, contribute at least up to the match.

So, how did I reach my goals?

• For starters, we chose an in-state public school. The tuition savings over an out-of-state school can be substantial.
• My wife went back to work to further boost our savings.
• We used the available financial aid to pick up the difference.

How do you eat an elephant? One bite at a time

If you’re staring down seemingly insurmountable college costs, here are a few tips to chip away at them.

• Start saving early. In fact, if you plan on having children one day, consider saving for college now and give yourself 20-25 years to plan.
• Live within your means and choose an affordable college. There are cheaper education choices, such as attending a community college, choosing an in-state, public school or even commuting from home if you live nearby.
• Apply for financial aid early because the funds go quickly. Use any loans wisely to help prevent post-college financial burdens.
• Don’t just look at the sticker price when choosing a college. Many of the more expensive schools offer competitive financial aid packages.
• Don’t neglect your retirement. At a minimum, keep contributing a base amount to your 401(k). After all, you can borrow money for college, not retirement.

The greatest tip, however, is to develop a plan, and start this plan early on. Stick to your plan and review it periodically. When you look back and it’s all said and done you’ll be glad you did.

[David Gallico is a Senior Financial Security Consultant at COUNTRY Financial]

It is impressive we have had any economic recovery at all despite the weakness in these “big ticket” items. But you know what? Cars get older and need to be replaced. The U.S. population is still growing and eventually new households will strengthen the housing market. Bottom-line – there has been some pent-up demand brewing here in the U.S.!

Autos sales have recovered nicely from the bottom (the big dip in the chart). This year, they’re actually sitting very close to their long-term average units sold of ~15 million units (the solid black line).

Why is this happening? According to Polk, a leading supplier of data for the automotive industry, the average age of passenger vehicle and light truck in the U.S. in 2011 was almost 11 years. Can you say pent-up demand!

So what about housing? Well it’s interesting. Historically speaking, big ticket items tend to trend together. Look at this second chart. New home sales and auto sales have typically mirrored one another. But now, we are starting to see a divergence. Will new homes sales catch up?

I think they will. However, it is difficult to predict when that recovery will occur. One thing is for certain. Housing has not been this cheap in a long time. Take a look at this chart below. It’s the U.S. Housing Affordability Index.

This index uses median home values, median family income and borrowing rates to gauge housing affordability on an index level of 100. Typically, a median income family has almost exactly enough income to afford a median priced home. Today, these families have almost double the income needed to afford a median priced home! The conditions for a housing recovery are there. Now all we need is demand.

Overall, the good news is we are starting to see a pick-up in these big ticket items, especially auto. This pent-up demand could give a big boost to the U.S. economy going forward.

• 77 percent said age 22
• 15 percent said age 18
• 8 percent said age 30

That’s even more pressure on post-grads and twenty-somethings to strike out on their own. Here are three financial tips for young working adults attempting to achieve financial independence.

Financial Tips

1. Read Up. For many of us, we didn’t take a course in college that prepared us for managing our finances. Luckily, there are plenty of books on the matter. Try I Will Teach You To be Rich and Your Money or Your Life to get started.
2. Pay Yourself First. Building wealth is the key to financial independence. Start simple and commit to saving 10 percent of your paycheck each month. Once you’re comfortable with your savings, start investing.
3. Set a deadline. Your first years as a working adult can be overwhelming. Set a realistic deadline for financial independence. You’ll be surprised how motivated and focused it makes you.

These steps are merely the beginning. But the habits you make in your early adult years can last a lifetime.

Critical Factors

When it comes to saving, whether it’s for retirement, education or a new bass boat, the critical factors for success include: the amount you save, the rate of return you earn and the amount of time you have to contribute and allow your savings to compound.

Which of these three factors do you think has the most impact on your success? The results might surprise you.

A Little Math

• Suppose you saved $5,000 annually at 7% for 30 years. You’d have $472,304 at the end of the period.
• Now, suppose you wanted to boost your final total … would you be willing to take on more risk? Could you eek out an extra 1% and boost your rate of return to 8%?
• Assuming you did, at 8% your total at the end of 30 years would be $566,416 ­– an increase of nearly 20%!

On the surface, taking on more risk to boost your rate of return seems to be an effective way to increase your savings, but is it the only way?

Working Hard for the Money

Based on the past decade or so, you may find it difficult to improve your rate of returns on a consistent, reliable and predictable basis. Know what though? Come up with an extra $1,000 a year and you don’t have to go out on a limb to improve your returns.

That’s right – $6,000 saved annually at that same 7% and 30 years would give you nearly the same amount as trying to boost your return to 8%. Check out the second and third bar on the chart below for a comparison.

Can’t come up with an extra $1,000? Save for a couple more years – that’s a few extra years of contributions and a few extra years of growth – and voila’, you’ve got about the same amount of money.

Sometimes, it’s more important to focus on the amount you save rather than your rate of return. Saving longer can have as big an impact as saving more or at a better rate. Control what you can, and no matter what turns the economy takes, you can adapt and not sacrifice your goals!

Managing your finances involves a different type of exercise: exercising your discipline. To be successful at it, you must learn the power of contentment.

Truest words ever spoken

Remember those Rolling Stones lyrics, “You can’t always get what you want,” but sometimes, “you get what you need.” Mick Jagger gave us great advice back in 1969 with this classic hit (B side of Honky Tonk Woman). A household that lives by a consumptive lifestyle cannot differentiate between wants and needs, like a dieter succumbing to dessert cravings.

There will always be a bright, shiny object you “need.” The key to stopping impulse buys is to control the person you see in the mirror each day. Add a new word to your consumer vocabulary ­– NO. Only buy things on the “want” list after you fund long-term needs. Try using an “impulse list” to learn to resist your spending temptations:

1. Set a dollar amount threshold for items that must go on the list.
2. Any desired item over that dollar amount must be placed on the list.
3. Research three prices for everything on the list before purchasing.
4. The tough one – wait 30 days before buying anything. The best part about the impulse list is once you leave the store, the buying fever goes away!

STOP the impulse

Here is what I learned counseling families with their budget. There is a type of content person who does not fall victim to impulse purchases and limits non-essentials. It’s people active in GIVING. Those who frequently give to charity have a different perspective on their own life.

I talked to a family last week who provides meals to a Rwandan school for about $250 per month. They sold their new car and bought a used vehicle. The extra money from not having a car payment funds the mission. The secret to contentment is focusing on others and not yourself.

Even if it’s just helping family or friends, changing your view of money’s role in your life is what’s important. What tips do you have to get control over buying the “bright, shiny objects?”