Young professionals have a lot on their plate, often juggling new jobs, the difficulties of working your way up the totem pole and relationships. While entering the workforce can be exciting, young professionals have to think about financial topics they never had to consider in the past, including student loan payments, building credit, obtaining health insurance and finding a place to call home.
Paying student loans
For 2011 college graduates, 2/3 of students were in debt at graduation, and the average student loan debt was $26,600 per borrower. Most young professionals fall into that unlucky 2/3 with debt, and the regular monthly payments can take a huge chunk out of your paycheck.
What to do:
First, be aware of your debt level and your interest rates on each loan. Your loan payoff plan should involve making at least the minimum payments on all your loans, but if you have any extra repayment ability, focus on your highest interest loans.
You may want to consider consolidating any private loans. Consolidation can lump them all into one, often lower, monthly payment. Use a student loan calculator to understand the benefits or drawbacks of consolidation.
Young professionals often have short credit histories and, therefore, relatively low credit scores. If you don’t already have a credit card, get one. This is one of the easiest ways to build credit – just make your payments on time.
What to do:
Recent college grads should look for a rewards credit card with a low APR that allows those without high credit scores to get approved. Paying off student loans on time will also help to build credit!
Obtaining health insurance
Gen Y is increasingly entering into non-traditional jobs, often working freelance, on contract or working for small startups. This job instability has led to an instability in health insurance coverage as well. Your health insurance options fall into three main categories: employer-based health insurance, individually purchased health insurance, and health insurance through a parent’s plan. Some small businesses do not offer health insurance, so you may have to obtain your own insurance coverage.
What to do:
Due to the Affordable Care Act, you can remain on your parent’s insurance until the age of 26, even if you are married, unemployed or live in a different state. If this is not an option for you, you can purchase individual health insurance for $150 to $500 per month. Working freelance? Check out the Freelancer’s Union for negotiated group rate health insurance plans that may be lower than individual rates.
Finding an apartment
Moving to a new city and unsure of how to find affordable housing? Try Craigslist or city-specific sites. Check out your college alumni network or try posting a housing request on LinkedIn in any relevant groups that you may be a part of.
What to do:
Although location is key, keep affordability top-of-mind. A good rule of thumb is to spend less than 1/3 of your income on rent. However, varying costs of living among cities can make this difficult. Housing costs in Manhattan, for example, are 75% higher than housing costs in Ann Arbor, Michigan according to a cost of living calculator. If you’re open to living with roommates or converting a living room into a bedroom, you can significantly reduce the cost of rent.
Acquiring an apartment is another challenge. Due to short credit histories, landlords may require a cosigner and a large amount of money upfront (sometimes as much as two months rent and a security deposit). Be prepared to ask a parent, sibling or older friend to cosign.
Divya Raghavan is an analyst for NerdWallet, a financial literacy site that offers unbiased recommendations for customers looking to find scholarships, financial advice, cd rates and more.
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Category: Money Basics