Graduating to 'the real world'

Anyone who's graduated from college understands the relief of leaving behind years of cramming for exams and living on dorm food. With the next chapter of their lives now at hand, this year's grads deserve kudos for successfully negotiating the twists and turns of higher education. Now the fun begins.

Take it from someone who's learned a few lessons the hard way – there are steps you should take now to ensure you start off on sound financial footing. A few tips:

Step 1: Budgeting 101. After living on a shoestring throughout college, many people go to the other extreme after landing their first full-time job, buying all the things they've done without. Before going on a spending spree, first figure out (A) how much you earn and (B) how much it costs to live. If (B) is larger than (A), not only will you not get ahead, you may soon find yourself reeling from debt.

Step 2: Figure out what you owe. Roughly two-thirds of young adults begin their post-graduation job search saddled with student loan debt – the average amount is around $20,000, but for many it's much higher. When you factor in rent, car payments, credit card balances and other monthly obligations, it's easy to see why some grads feel overwhelmed.

Although most federal student loan programs offer a repayment grace period, many private loans don't. Ask your lender whether they'll reduce your loan's interest rate if you agree to automatic monthly payments or after making a certain number of on-time payments. If you anticipate repayment difficulties, contact your lender immediately to discuss your options. You may be able to work out an agreement to defer payments, extend the loan's term or refinance at a lower rate.

Step 3: Know the score, credit-wise. Many people don't realize the important role their credit score plays in their financial future until after they've seriously damaged it by making late payments, bouncing checks, opening too many accounts or exceeding their credit limits. This can haunt you later, not only when you try to borrow money for a house or car, but also when you try to rent an apartment or apply for a job, since many landlords and employers now check credit records and reject applicants with poor credit.

Find out where you stand by ordering credit reports from the three major credit bureaus – Equifax (www.equifax.com), Experian (www.experian.com) and TransUnion (www.transunion.com).You can order one free credit report per year from each bureau. Order through www.annualcreditreport.com; otherwise you'll pay a small fee.

To learn more about the importance of understanding and improving your credit score, visit What's My Score (www.whatsmyscore.com), a financial literacy program for young adults run by Visa Inc. It features a comprehensive workbook called Money 101: A Crash Course in Better Money Management, which can be downloaded for free. The workbook covers such topics as:

• Making smart financial decisions.
• Creating a workable budget.
• Explanation of banking services.
• Understanding different types of loans and credit scores.
• Saving to reach financial goals.

What's My Score also features a free tool for estimating your credit score, guides for renting an apartment, buying a car and improving your credit score, and links to many other helpful sites.

This is when all your hard work finally starts to pay off – just make sure you don't sabotage yourself by overextending your finances early in your career.