When you graduate college, your priorities shift from football games and final exams to landing your first job, locking down an affordable apartment and repaying student loans.
Here’s one more worth adding to the mix: Pay attention to (and improve) your credit score.
That’s a lot of new variables in play for young adults who probably haven’t paid much attention to their finances. It’s also a good reason graduates should take advantage of credit counseling to help them make sense of and overcome these new obstacles.
Post-graduate credit counseling is fiscal advice on how to manage your money. It’s free information from budgeting experts that can put you on the right financial track, depending on your life goals, i.e. buying a house, climbing out of student loan debt or saving for retirement.
“Once your student loans, rent payment, car payment, and personal spending kick in, you may find that you have nothing left in your bank account at the end of each month,” said Chad Pavel, CPA firm owner and founder of Pinewood Consulting, LLC, an NYC-based accounting and consulting firm serving entrepreneurs and investors.
“Credit counseling can help young people learn how to build their credit score, recognize and avoid dangerous credit situations, and set themselves up to use credit responsibly when they truly need it.”
Credit Counseling for Post-Grad Financial Planning and Advice
Credit counseling can help graduates plan for life’s unexpected twists and turns. If you’re struggling to find a job fresh out of the graduation gates, you’re not alone.
Around 53% of graduates start out working a job after college that doesn’t require a bachelor’s degree. To add insult to injury, 50% of grads say they plan to move back in with their parents after school. This means half of us spend four years in college only to find ourselves back in our hometown working retail and riddled with student loan debt.
“The toughest hurdle when graduating from college is financial uncertainty,” Pavel said. “You are starting from ground zero. You have a short credit history, little savings, a new job, and you are trying to balance the shock of being young [and] being responsible at the same time.”
A lot of us have no problem juggling our new responsibilities, but some of us need guidance to overcome these new hurdles. Credit counseling puts your spending habits into perspective. You’re matched up with an impartial individual, who can look at your situation from a neutral standpoint (unlike a friend or relative) and tell you, in plain terms, what steps you need to take to get to where you want to be: financial independence.
But, why credit counseling?
Credit counseling can help graduates with the following:
Sure, it’ll help you manage your money, but aren’t there apps for that? That’s a lot like asking why a sick person would bother consulting a doctor when they could just google their symptoms online and get a diagnosis.
Credit counseling is hands-on and personal. You’re not hidden behind a computer screen unless you want to be; since online credit counseling is available as well. Credit counseling can also provide you with options that budgeting apps can’t, like debt management plans for young grads who got in over their heads after their first taste of credit.
“If students relied upon credit cards during college but are now making a good income, a credit counselor can help them formulate a plan of attack that will help them to pay off the debt quickly and in the most efficient way,” Candice Elliott, Editor in Chief at Listen Money Matters told Debt.org.
Other Ways Credit Counseling Can Help Transitioning Grads
Credit counseling covers a large scope of your financial background. It’s a broad term that encompasses a lot of different money managing strategies.
Here’s a list of a few of the things credit counseling can help you with:
- Family financial planning
- Entering the job market
- Planning for major purchases such as a buying a home or a car
- Housing counseling
- Student loan counseling
- Designing a debt management plan
Also, credit counseling can teach you about fair lending practices. If this is your first rodeo with banks, credit unions and online lenders, you best not rush in blindly.
Some creditors won’t think twice about ensnaring you in a bad (yet perfectly legal) contract. Once you’re locked in, it can be hard to find a loophole to free yourself.
“One of the biggest problems we see is young people being taken advantage of by creditors,” Pavel said. “Many people simply don’t understand the powerful (good and bad) nature of interest rates. If you take on too much bad debt at high rates, it can cripple your credit profile and your financial future.”
This is why we recommend calling a credit counselor or financial advisor before setting anything in stone. Taking a little extra time to make sure you’re getting a good, clean deal will save you a lot of grief in the long run.
Credit Counseling and Student Loans
The Federal government gives you six months after graduating before you have to enroll in a student loan repayment plan. That number isn’t random. It takes an average student three to six months to find a job after graduation.
However, just because you’ve landed a salary doesn’t mean your student loans are going to work themselves out.
“One of the most common mistakes recent graduates make after landing their first job is to immediately start upgrading their lives,” Elliott said.
“They’re making ‘real’ money for the first time and it seems like a lot. So, they move out of their inexpensive college apartment for a more expensive one, trade-in their old but still serviceable car for a new one, spend a lot of money going out to dinner or drinks after work.”
It’s easy to get in over your head without thinking of the long-term burden that student loans can grow into, if not addressed from the get-go. Credit counseling can make this process a little smoother for you by going over each of the student loan repayment plans offered by the federal government, helping you decide which one is right for you.
The last thing you want to do is try and tackle your student loans without a budget. Your best way forward is with a long-term plan. Think of a student loan counselor as an architect helping you draw up the blueprints that will secure your financial future.
We also asked Elliott what new graduates can do to avoid the common pitfalls young people face after college.
“If recent grads can continue to live their ‘student’ lifestyle for an extra year or two, it can really make a difference allowing them to do things like build an emergency fund, contribute to their employer’s 401k, and start working towards getting rid of their student loan debt,” she said.
“Stay in that cheap apartment, drive that old car for a few more years and continue to socialize in the same inexpensive ways they did as students.”