Credit-Card Debt and Student Loans: Dodging the Hazards of Post-College Life
It's tough to get ahead when you're starting so far behind.
College graduates entering the work force -- as many have this fall -- are bombarded with financial advice: Build up a rainy-day reserve. Be a homeowner, not a renter. Join the company retirement plan.
But for many of today's 20-somethings, this advice is proving mighty hard to follow, thanks to daunting student loans and hefty credit-card debts. Caught in this quagmire? Here are ways to get your finances on track.
COLLEGE CREDITS
Borrowing money has become a big part of undergraduate life.
? Last year, 73% of those graduating from private colleges had student loans, versus 62% of public-college graduates.
? Almost 24% of undergraduates report using credit cards to pay tuition.
? More than half of final-year undergraduates have four or more credit cards.
Sources: College Board, Nellie Mae? Keeping your balance. Over the past five years, total annual borrowing through student loans has soared 85%, easily outpacing the 41% rise in public-college costs and the 28% increase at private schools.
Indeed, among kids graduating last year from private nonprofit four-year colleges, 73% had taken out loans, typically borrowing $19,400, according to the College Board, the association of schools, colleges and universities.
Given the likely earnings of these college graduates, such debt levels "aren't extraordinary," contends Sandy Baum, a senior policy analyst at the College Board. "The problem is that they have all kinds of other debts. Students graduate and then they borrow as much again to buy a car."
Kids are also leaving college with a fistful of credit-card debt. According to Nellie Mae, the college lender in Braintree, Mass., 91% of final-year undergraduates have at least one credit card and they carry an average balance of $2,864. In fact, almost 24% of students report using credit cards to pay tuition.
You can pin part of the blame on Mom and Dad. As baby boomers scramble to save enough for retirement, they just don't have the spare cash to help their kids with college costs.
What to do? As soon as you start collecting a paycheck, strive mightily to pay off any credit-card debt -- and thereafter never carry a balance. In addition to avoiding the financing charges, credit-card debt is a key indicator of financial health. If your card balances are ballooning, that means you're spending more than you're earning, and that spells trouble.
By contrast, I wouldn't be in a big rush to pay off student loans. The interest should be tax deductible, and the interest rate probably isn't too onerous. Moreover, paying down debt isn't much fun. You want a sense of financial progress, and the way you get that is by amassing some savings.
? Snagging the match. To that end, check out your employer's 401(k) or 403(b) retirement-savings plan. These plans are the best deal in savings, thanks to the initial tax deduction, the tax-deferred growth and any matching employer contribution.
"You've got to get that match," says Pittsburgh accountant and attorney James Lange. "That's like getting a 50% or 100% return in a single day."
Ordinarily, I suggest investing the maximum possible in a 401(k) or 403(b). But these plans are designed for long-term investing -- and you are probably facing a heap of short-term financial demands.
With that in mind, contribute just enough to get the full company match, which might mean socking away 6% of your paycheck. That way, you will get into the habit of saving regularly, but you should still have money for other goals.
If saving even a small sum is a struggle, ask your parents for help. If you're showing some financial responsibility, they will likely be thrilled and they might agree to subsidize your 401(k) investments.
? Supersize your savings. With any luck, even after funding your employer's plan, you will have a few dollars to spare. My advice: Stuff those dollars into a Roth individual retirement account.
True, you won't get an immediate tax deduction with a Roth, like you would with a 401(k) or a traditional tax-deductible IRA. But once you reach age 59?, all your Roth withdrawals will be tax-free.
As an added bonus, the Roth offers an unusual amount of flexibility. In fact, by stashing money in a Roth, you can save for retirement, build up a rainy-day reserve and amass a house down payment all at the same time.
How so? With retirement accounts, if you make a withdrawal before age 59?, you usually get slapped with income taxes and possibly tax penalties. The Roth, however, is a little different.
Suppose you contributed the maximum allowable to a Roth for the next five years. That would mean investing $4,000 in 2005, 2006 and 2007 and $5,000 in 2008 and 2009, for a total of $22,000. Ideally, you would leave this money to grow tax-free until retirement. But that might not be an option.
Need a chunk of change for a house down payment or a financial emergency? At any time, you could withdraw your $22,000 in Roth contributions and owe nothing in taxes.
For first-time home buyers, it gets even better. In addition to the $22,000, you could pull out as much as $10,000 of the account's investment earnings and there wouldn't be any taxes or penalties owed. But to make a tax-free withdrawal for a home purchase, you would need to wait until early 2010, so that Uncle Sam considers the account to have been opened five years and thus eligible for a "qualified distribution."
"You shouldn't look at your Roth as a bank account, where you put in $4,000 this year and take out $2,000 next year," says Art Canter, an investment adviser in Boca Raton, Fla. "But for a big emergency or for a house down payment, it's definitely something to consider."
职场新人如何巧避财务风险
如果你起步太晚，要想超过别人可就没那么容易了。
刚刚加入就业大军的毕业生们正在听到各种各样的理财建议：储蓄以备不时之需；买房而不要租房；加入公司的退休计划等等。
但对于如今许多二十几岁的人来说，高额的学生贷款以及信用卡债务让他们很难按这些建议去做。你也有这样的问题？下面就教你如何让财务状况重回正轨。
理清欠款。学生贷款的全年借贷总额在五年来猛增了85%，大大高于公立大学41%和私立大学28%的收费增长。
据美国大学理事会(College Board)统计，去年从四年制非营利性私立大学毕业的学生中，73%的人依靠贷款，通常贷款额为19,400美元左右。
该理事会的一位资深政策分析师桑迪?鲍姆(Sandy Baum)认为，和毕业生未来的收入相比，这样的债务“并非难以承受。问题是毕业生们还有其他许多债务。毕业后，他们还要借差不多这么多钱买车。”
走出校门的大学生手里还有一些信用卡债务。根据学生贷款公司Nellie Mae的数字，即将毕业的本科生中有91%至少拥有一张信用卡，平均欠款2,864美元。有24%的学生称，他们用信用卡付学费。
你或许可以为此责怪一下爸爸妈妈。婴儿潮一代为攒下足够的退休金已捉襟见肘，根本没有余钱负担孩子们上大学。
该怎么办？从领到第一份薪水开始，就尽全力偿还信用卡债务吧，而且以后也不要再欠款了。这样做就避免了支付利息，另外，信用卡债务也是财务状况良好与否的关键指标。如果信用卡债务激增，就意味著你入不敷出，也就意味著麻烦。
相比之下，偿还学生贷款用不著太过著急。因为学生贷款的利息可减免扣税，利率可能也不是太高，况且还债也不是什么有意思的事情。你想得到一种财务状况好转的感觉，而得到这种感觉的方式就是存些钱。
不要放弃公司的等额支付福利。仔细研究一下公司的401(k)或403(b)退休储蓄计划。因为具有扣税减免、资金增值部分延期交税以及公司同时等额支付，这些计划堪称最好的储蓄方式。
匹兹堡会计师兼律师詹姆士?兰格(James Lange)说，“不要放弃公司的等额支付部分。那相当于一天有50%或100%的收益。”
一般来说，我都建议人们尽可能多地缴纳401(k)或403(b)。但这些计划都是为长期投资设计，而你依然面临一些短期支出需求。
因此，只要按公司的等额支付上限从工资中拿出钱（比如6%）来缴纳401(k)或403(b)即可。这样，你就可以养成定期储蓄的习惯，而且仍有钱做其他事。
如果存这么一小笔钱都很困难，那就要父母帮忙了。如果你表现出一些经济责任感，他们也许会很开心并同意资助你的401(k)计划。
尽可能地储蓄。如果走运，你在缴纳401(k)或403(b)后可能还有些余钱。我的建议是：将这笔钱存入罗斯个人退休帐户(Roth individual retirement account)。
罗斯确实不能让你像401(k)或者传统个人退休帐户那样马上享受□税，但等到你满59岁半后，你从罗斯帐户提领款项是无需缴税的。
更吸引人的是罗斯帐户的使用非常灵活。罗斯帐户的存款可用于退休储蓄、不时之需和房款首付。
这是怎么回事呢？如果你在59岁半以前从退休帐户取款，通常都需要缴纳所得税，甚至接受税务罚款。但罗斯帐户有点不同。
假设未来5年，你按最高额度向罗斯帐户存入资金，也就是说在2005、2006和2007年分别存款4,000美元，2008和2009年分别存款5,000美元，总额为22,000美元。理想情况下，你可能一直都不会不动这笔钱，22,000美元就在帐户里慢慢增值，这样也无需缴纳税款。但很可能情况不是这样。
你可能需要一大笔钱支付房款首付或有其他不时之需？你可以随时从罗斯帐户中取出这22,000美元，而且无需纳税。
对于首次购房者来说，罗斯帐户的优越性更强。除了这22,000美元，首次购房者还可以取出最多10,000美元该帐户的投资收益，不用缴税也没有罚款。
投资顾问阿特?坎特(Art Canter)说，“你不应该把罗斯帐户看作是今年存4,000美元明年取2,000美元的银行帐户。但为了应急或房款首付，罗斯帐户确实值得考虑。”
