An estimated 1.5 million students graduated 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. 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. Now is the best time to start on your way to "getting rich" by following these critical first steps
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. Begin to build success by setting up automatic deposits from your paycheck directly to your savings account.
2. Begin wealth creation by eliminating credit card debt. Pay the bill within the grace period. 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.
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 through the employer match.
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 can only pay a small amount, it is much better than having delinquent or missed 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 transition some of your student loans to a home equity loan by converting your non-deductible student loan to a home equity loan. You may be able to shelter your earned income from taxes, because the interest you pay on a home equity loan may be tax deductible.
8. Roll up your sleeves and get involved in your investments 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. Consider setting up searches and RSS feeds to get the latest perspectives on investing.
9. Diversify your savings and investments. Beyond putting money in the bank, make sure you invest in a variety of asset classes to balance the risk you take and enhance your portfolio returns. A well-balanced portfolio, regardless of size, will have a mixture of stocks, bonds, cash, and possibly real estate and hard assets (including precious metals and commodities).
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 just takes a cohesive investment strategy...and time.