Pay Dirt: Graduates, confront the money question

In the month after college I went from feeling flush to feeling flat broke. Goodbye room and board paid by Mom and Dad. Hello high rent and heating bills. And student loan payments. And clothes for work. And parking expenses. And -- need I go on?

If only commencement speakers spent a little less time talking about dreams and a little more time on the financial know-how that makes achieving them a little easier.

So here is my graduation gift to the class of 2010 -- what I wished I knew about money when starting out. If you have more suggestions, send your advice to kmcguire@startribune.com and I'll share it on my blog.

Save, no matter how broke you feel. Promise that you'll set $1,000 aside in emergency savings before anything else. Then promise to save $50 a month. It may not seem like much, but if you save $50 each month for the next four decades earning a modest 5 percent, you'll have more than $75,000. It's not enough to retire on, but it's not chump change, either. If your employer offers to match the money you invest in your workplace 401(k) up to a certain amount, save at least that much. No excuses. Unless you enjoy leaving free money on the table .... If they don't, consider a Roth IRA.

Don't track your spending. Let technology to do it. To know how much you can afford to save, you need to know how much life costs. Fortunately, the days of check ledgers and carbon copies are over. If you use a debit card or credit card for most of your transactions, then services such as www.mint.com or www.wesabe.com can easily track and categorize your expenses. They also will send budget alerts to your e-mail or phone.

If a cash-only system works for you, then divvy up your allotted monthly amounts in envelopes. Or take only a certain amount out of the ATM for the month, and vow not to go back until next month.

You can drink lattes. Just not every day. I won't prattle on about how making your coffee at home is the key to getting rich. It's true, if you piddle away small sums of money daily they turn into big sums lost. But sometimes a girl just wants a fancy coffee drink.

Your paycheck isn't as big as you think. After taxes, health insurance and other expenses that are yanked from your earnings before you see the first dollar, your take-home pay doesn't come close to that salary you cite if someone dares ask "How much do you make?" Multiply that take-home pay by the number of times you're paid each year. That's about how much you make. Don't spend a penny more than that. Spend far less, actually.

Bad things can happen to you. Not to be a downer, but you have to buy some types of insurance, even if money is tight. Auto insurance is a given. Health insurance will be easier thanks to a provision in the new health care bill that allows anyone age 26 or younger to stay on their parents' insurance. That doesn't take effect until late this year or early next. But don't wait: Low-cost, high-deductible policies are available. Disability insurance will replace your income if you can't work, which is more common than you'd think: A 20-year-old has a 30 percent chance of becoming disabled, the Social Security Administration says. Renters insurance will protect the contents of your apartment.

Set foot in the kitchen. It's cheaper to cook at home than to eat out (unless your meal's from the dollar menu). Check a cookbook out of the library or head to www.allrecipes.com. Buy a Crock-Pot or a microwave. Don an apron and have a dinner party. You might even enjoy it.

Get credit. I don't just mean to apply for a credit card, although when you do, look for one with no annual fee and the lowest rates you can find. I mean, understand how credit works. You wouldn't believe it, but I've run across people who didn't realize they had to pay the money back. Seriously. Before you charge, read up about the new credit card rules at www.federalreserve.gov. Understand your credit score -- the three-digit number that everyone from lenders to landlords uses to determine if you're a risky borrower. The website www.whatsmyscore.org can help. And get your free credit report every year, but only from www.annualcreditreport.com. Fix any mistakes on your report -- they can ding your score and boost the interest rates you pay.

Don't ignore your debt. Pay more than the minimum on your credit cards. Figure out a plan to pay off your student loans. If you can't afford to pay them, get help. Work with your lender to find a repayment plan that works for you. For help with credit cards, consider meeting with a nonprofit credit counseling service. But don't pay a so-called debt settlement company to dig your hole deeper.

"Do I really need this?" Ask yourself that question when you're weighing a decision at the store. The answer's probably no.