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New Graduates Can Plan Financial Security Starting Now


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Bills.com's six steps to starting financial life on the right foot

When finals are over, the dorm room is packed and friends are on their way to that first step on the career ladder, today's college graduates are in the perfect position to start their personal financial lives on the right foot, said Ethan Ewing, president of Bills.com.

"The average American graduates from college with around $20,000 in debt, a starting salary around $30,000, and a burning desire to live it up now that cash is coming in," Ewing said. "But the first few years of your working life are the perfect time to invest in your future by getting rid of as much debt as you can and investing in yourself."

Follow these steps from Bills.com to lay a foundation for years to come.

1. Calculate your net worth. Your salary might look good. But take a realistic look at the complete picture by tallying your net worth. Add up the value of your assets (investments, resale value of a home or automobile or other major assets, and the value of cash, savings and checking accounts). Total your debts, including mortgage or car loan, student loans, personal loans and credit card balances. Subtract debts from assets. "If the number is negative, you have significant work to do," Ewing warned. "If it is positive, work to make it stronger."

2. Pay off credit card debt first. Of all personal debt, credit cards typically have the highest interest rates, and their issuers often are the most aggressive creditors when payments are missed. "If you have multiple credit cards, a car loan or other debt, begin paying the most on your debt that carries the highest interest rate while making minimum payments on other debt," Ewing explained. "When the debt with the highest interest rate is paid in full, move to the next-highest-rate debt and implement the same strategy."

3. Tackle student loans. For most people, student loan interest is tax-deductible, and the debt was accrued for a good cause: an investment in the future. Still, the sooner the debt is paid, the sooner graduates can use their money to purchase a home, invest in retirement or pursue another goal. "Trust us: In 10 years, you will be thrilled if you eliminated your loan payment early," Ewing said. "After paying your credit card debt, apply as much of your free cash flow to student loan payments with an eye to paying them off as early as possible."

4. Save part of your income. Get into the best habit -- saving for the future. Set up paychecks so that 10 percent is deposited directly into a savings or money market account. The goal should be to accumulate enough funds to cover expenses for three to six months in case of an emergency. This emergency fund also can help avoid putting unexpected costs on a credit card.

5. Plan for retirement. Any employee whose employer matches contributions to a 401 (k) fund should contribute the maximum amount that is matched. Today's savings will pay off amply for the future, with the benefit of compound interest. People who are on their own for retirement savings should first establish an emergency fund, then put that 10 percent savings into IRAs and other retirement savings. "Even when your salary increases, keep saving 10 percent of the amount," Ewing suggested.

6. Live within your means. Last, but not least, do not go into debt to fund a new lifestyle. Plenty of people who live in posh apartments or drive the newest cars do so under a tremendous debt burden. "Instead of joining them, live modestly and enjoy the knowledge that you can balance your checkbook with a clear conscience," Ewing urged

"Every step you take today to get out of debt frees up options for your future," Ewing reminded graduates. "You will be able to purchase a better home, have more options for everything from vacation to children's education, and plan for a more secure retirement if you get -- and stay -- in the habit of making wise financial choices today."

Based in San Mateo, Calif., Bills.com (www.bills.com) is a free one-stop portal where consumers can educate themselves about complex personal finance issues and comparison shop for products and services including credit cards, debt relief assistance, insurance, mortgages and other loans. As the online portal to Freedom Financial Network, LLC, the company has served more than 40,000 customers nationwide since 2002 while managing more than $1 billion in consumer debt. 

In 2008, Entrepreneur Magazine ranked Bills.com as the No. 3 fastest-growing U.S. company on its Hot 100 list. Bills.com also was named a finalist as “most innovative company” in the American Business Awards in 2008. Company co-founders and co-CEOs Andrew Housser and Brad Stroh were named to the Silicon Valley/San Jose Business Journal's "40 Under 40" list in 2008, and as Northern California finalists in Ernst & Young’s 2008 Entrepreneur of the Year Awards.

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