Economy's silver lining for new college grads

As millions of college students are graduating and entering the real world, while they may not be facing the best of times these times are better in some ways.

Yes, the unemployment rate keeps going up. But that only causes students to focus harder on job skills to make them more marketable. For those that have a job, it's a wakeup call to manage money wisely.

Start by paying off debt, mainly student loans and credit cards, so that the new focus can be on savings instead of the accumulation of debt that often occurs in college. If student loan rates are based on old interest rates from a few years ago, it's a great time to consolidate and get a lower rate.

If the new job is stable, the next step is having the benefit of buying a house in a great market for buyers. Add on the current tax break of $8,000 for first-time home buyers and it becomes even a better deal. We may never see mortgage rates below 5 percent again. Obviously, the difficulty here is buying a home when the job market is not stable or moving up the ladder requires relocation. However, college grads may have more job security as companies dish out early retirement packages to older, more expensive, workers.

Those first two steps already are saving thousands of dollars that were not available to other graduating classes in past years. It's enough to give grads a head start toward financial success.

The next benefit of this economy for grads is investing in stocks at lower prices. Grads will benefit most from a lower market because they have the most time to recover. The stock market in 40 years will be a lot different than today.

If not investing through an employer plan, then start with a Roth IRA. That not only builds for retirement but is not taxed at retirement, unlike other retirement accounts. A $4,000 investment now could be worth $100,000 in 40 years. Would you want to pay the tax on $4,000 or $100,000?

If it means living frugally today just to save, the sacrifice would be worth it. Make and stick to a budget that leaves you at least $4,000 a year left over to invest. That means cutting back on eating out, movies, music and cars. If that hurts now, think about how much more can be spent on those when there's more money in the future.

Starting out in bad years often instills a more cautious feeling with money and can avoid foolish mistakes knowing that money really can disappear quickly.

Tags: money, business, economy, graduation, finance