The Student’s Guide to Understanding The Hartford
is an Official
and Planning Your Financial Future Corporate
www.playbook.thehartford.com the NCAA®
Graduate to a Brighter Financial Future
Have you ever thought, “If I only Whether you’re graduating from That’s why The Hartford, in collab- of all ages have told us, “This is the
knew then what I know now?” college, starting a new job, or renting oration with the NCAA, created the guide I wish I had had when I was
I know I have. your first apartment, you’re facing Playbook for Life -- a practical guide starting out!”
a number of financial decisions -- based on real-life experiences to help
Throughout our lives, we learn from ones that can affect your future for you be successful in managing your We invite you to take a few minutes
experience. There are things we did years to come. From evaluating finances. The Hartford is a leading to explore this Playbook and check
right, and things we wish we had salaries and benefits, to budgeting investment and insurance company out the additional resources at
done differently. If you’ve had for housing and living expenses, to with a strong 200-year history, and www.playbook.thehartford.com.
people in your life whose insights understanding credit, insurance, we believe that a great life plan is Let us know what you think.
and experiences have helped you saving, investing and retirement, based on a solid financial strategy.
make a better decision or avoid a there’s a lot to know. We at The Hartford wish you all
pitfall, you know firsthand how Since we launched the Playbook the best as you plan for your future
valuable that guidance can be. You may have more for Life in early 2005, we have and realize your dreams. We look
questions than answers shared this guide with more than forward to accompanying you on
This Playbook for Life was created to at this point, and like 200,000 students and young your journey.
help provide the information you three-quarters of adults. We have also visited
need to plan for your financial future. college students, you numerous college campuses, Best wishes,
may wish you had and the feedback we’ve received
We understand it may be difficult more information about along the way has helped make
to plan beyond today, particularly personal finance. the content useful and
if you’re dealing with student loan relevant to a Tom Marra
payments, tight credit and rising broad audience. President and Chief Operating Officer,
living costs. But there are steps In fact, people The Hartford Financial Services Group, Inc.
you can take right now, even if
you don’t have much money.
Table of Contents
at illie pelit.
2 Getting Started Early
It’s all about having a plan for you and your money. 19 Real World Story: Housing
“If I could go back, I would have put that rent money
toward buying a home sooner rather than later.”
4 Budgets Give You Choices
A spending plan is like a road map to get you where
you want to go. 20 Buying a Car
Everyone needs wheels, right? Wrong. Your first choice
is deciding whether you actually need a car right away.
7 Real World Story: Budgets
“I soon discovered that little things add up quickly.”
22 The Basics of Saving
The most important personal finance lesson
8 Credit Counts
Understanding credit is crucial to starting off on
is learning the value of compounding.
a solid financial footing.
24 Investments: Put Your Money to Work
Choosing among the best options now and for the future.
10 The Basics of Credit Cards
Not all credit cards are created equal; it pays to shop around.
28 Retirement: One Goal, Several Options
Saving for retirement is always smart. Now is the
11 Real World Story: Credit
“It wasn’t easy wiping the balance sheet clean.”
time to start.
12 Interest: The Cost of Money
It’s all in the percentages; different rates will
30 The ABCs of Insurance
You’ll likely need at least some types of insurance
as soon as you graduate from college.
dramatically affect your bottom line.
13 Finding the Right Job for You
Cover all your bases, consider all your options.
32 Taking a Bite Out of Taxes
If you know the rules, you’ll be sure to pay just
your fair share.
14 Evaluating the Job Offer
Benefits can be as important as the salary. 33 Top 10 Quick Tips
An easy access game plan at your fingertips to help you make
Housing You Can Live With
16 Putting a roof over your head shouldn’t put a big hole
in your wallet – if you think it through. 34 Additional Web Resources
A place to get started for additional information.
Getting Started Early
It’s all about having a plan for you and your money.
some far-off, distant future. And they It’s a great idea to review your
common, think again. Personal finance
goals every year. Pick the same
is about setting goals, making choices, understand that it is not impossibly day each year, perhaps New Year’s
and following through. In the next few complicated, and does not require a Day or your birthday. Remember
years, you’ll find that managing your lot of money to start. You can start to set goals that are reasonable
and measurable, for example,
money will become an increasingly planning your finances now, too. saving $50 or $100 a month
important part of your life. Even if you toward retirement.
don’t have much cash to work with now,
it’s well worth it to start learning all you
can about how to handle your money. Short-Term Goals
As your income grows, you’ll know what
Monthly Amount Date
Life is a lot like sports – it’s all about your options are, what mistakes to Goal Contribution Needed Accomplished
setting goals, making choices, and avoid, and what steps to take to achieve
following through to achieve the best the best possible outcome.
outcome possible. If you play on a
team or for your own pleasure, when The Future Is Now
you train, you set goals. You might Many people spend their 20s not giving
want to build muscle. Or gain speed. a thought to managing their money.
Whatever your goal, you can make Whatever they have, they spend. Before
choices to help you accomplish it. they know it, they’re in their 30s – or 40s Long-Term Goals
– and wonder where to start. If you look Monthly Amount Date
The same approach can be applied around, though, you’ll notice that those Goal Contribution Needed Accomplished
to many aspects of your who do start planning
life – and one of the most Many people spend early are the ones who
important is personal are poised for financial
finance. If it seems like their 20s not giving a success. They know that
sports and personal thought to managing financial planning is not
finance have little in just about retirement in
their money. Whatever
they have, they spend.
PDF versions of the Goals
and Net Worth Worksheets
can be downloaded for free at
Write It Down. Build a Chart. helpful to record it in order to track your Net Worth Worksheet
Make a Plan. improvement in the future.
Never underestimate the value of putting Assets (what you own) Value
your goals on paper. Once they’re written It’s also a good idea to record your goals, Cash $
down, it’s easier to see where you are, keeping them simple, measurable, and Checking Account $
revise your goals if necessary, and move realistic. You might want to increase your Savings $
forward. It really works. salary by a certain amount, save a fixed Certificates of Deposit (CDs) $
amount each month, buy a car, or reduce Retirement Accounts $
The first thing to write down is your your debt. At the end of the year, you Mutual Funds $
personal financial net worth statement. Stocks $
can feel good about the goals you have
This is a list of what you own, what it is achieved, consider why you might not
Real Estate (Own) $
worth, and what you owe. When you have reached some, and establish new
start out, there might not be much to ones for the coming year. Personal Property (Electronics, Jewelry, Furniture, etc.) $
write, but it is still a useful exercise; it’s a Cash Value Life Insurance $
baseline measurement. Think of it this Review your net worth each Subtotal $
way: If you’ve never run five miles and year. It will help you monitor
your progress and might even Liabilities (what you owe) Value
your first time is pretty slow, it’s still serve as motivation to take Student Loans $
better care of your finances. Credit Card Balances $
Auto Loans $
Other Loans $
Break Big Goals Into Bite-Sized Pieces Mortgage Balance $
Breaking long-term goals into shorter ones will make them seem Other $
much more attainable. For example, instead of writing down Subtotal $
that you will save to buy a car, plan to save $50 per month – or Total Assets $
To find your total net worth,
whatever you can realistically afford – toward a down payment.
just subtract your liabilities Total Liabilities – $
Or, instead of saying you will pay off your credit cards, specify from your assets. Total Net Worth $
that you will pay an extra $10 per week or month – or whatever
you can comfortably afford. Set your goals, make practical Note: If you own a home or real estate and have a mortgage, count the value of the property if you were to sell it as an asset,
and the balance you owe as a liability. So if you own a condo that would sell for $150,000 and you paid a down payment of
choices to carry them out, and follow through all year. $30,000, and have a $120,000 mortgage, you have a $150,000 asset and a $120,000 liability. This ultimately translates to
$30,000 in equity.
Budgets Give You Choices
A spending plan is like a road map to get you where you want to go.
credit card debt, you might actually expenses and those that do not occur The Low Down on High Tech
save $165, because you’d be eliminating every month, such as the occasional car New technology can throw your budget
some of your next month’s interest repair, gifts, or clothing. The best way out of whack. Example: Just about
charges. Or, if you took that $150 and to do this is to estimate how much you everybody needs a cell phone these days,
saved it in an account, it could earn would need in a year to cover your but buying ring tones, ring back tones,
interest. Maybe $150 per month would unexpected or one-time expenses, and backgrounds and games, or paying
be a big chunk of a monthly car loan then allocate 1/12 of that estimate to extra for text alerts can get expensive.
payment. your monthly budget, whether you Games and text messaging can transform
spend it that month or not. an affordable monthly bill into a
Seemingly small expenses, like MP3 budget-wrecking nightmare. Ditto for
Say the word “budget,” and images of downloads and ATM fees, can also add If this all sounds too serious, it’s downloading music and videos for
“doing without” often come to mind. up quickly; a budget will keep you on important to note that budgeting does your MP3 player.
But what budgets really do is reveal track. When you get all your spending not mean doing without fun. By all
information that enables you to take patterns down on paper, you have a road means, when you create your budget,
control and make choices. They help map of your financial plan. It helps you factor in eating out, entertainment, Start an Emergency Fund
you plan how to pay for necessary see where you are, where you want to and social activities. Many financial planning experts suggest
keeping an emergency fund of three to
expenses with the funds you have, and go, and how to make the right choices six months’ worth of living expenses in
they show you how you are actually to get you there. Then take a good look And don’t forget to include savings as a the bank or in another easily accessible
spending your money – something that and decide if this road map is taking budgeting goal. Try to avoid falling into investment in case you have unexpected
needs or lose your job. When you are
is not always obvious. you where it should. the trap of saving only what is left over.
just starting out, this can take a while
Whenever possible, give that $50 a to accumulate, but once you have your
Where Does Your Money Really Go? Sounds Like a Plan month you earmarked for savings the emergency fund, you can go on to
You might be spending too much on The other part of your budget is a plan: same priority as the electric bill; it must invest in other ways,
and rest easy knowing
items you don’t really need. Spending What items do you know you must pay be paid each month. Many personal you have a financial
$5 every day on coffee and lattes might for each month? These are basics like finance experts say “paying yourself cushion should
seem like a small expense, but it adds rent and utilities, food, transportation – first” is critical to financial success. a problem arise.
up to $150 per month. If you used anything that’s absolutely necessary.
that $150 per month to pay down your Remember to allow for unexpected
A blank Budget
be found on the
Here’s how a budget works. Sample Budget
We’ve created a sample budget to show
Expense Monthly Yearly Expense Monthly Yearly
how each dollar of a salary might be
spent and why it is so important to Housing Insurance
track. We’ve also pointed out a few 1 Rent/Mortgage $ 409 $ 4,908 3 Health Insurance $ 45 $ 540
Electric $ 32 $ 384 Auto Insurance $ 91 $ 1,092
important areas of your budget. Telephone/Cell Phone $ 48 $ 576 Home/Rent Insurance $ 12 $ 144
Salary: Water $ 3 $ 36 Life Insurance $ $
$35,000 Heat (Oil/Gas) $ 32 $ 384 Recreation/Entertainment
Location: TV (Cable/Satellite) $ 50 $ 600 Movies/Concerts/Shows $ 23 $ 276
New Haven, Connecticut Internet Access $ 26 $ 312 Magazines/Books/Music/DVDs $ 20 $ 240
Furniture/Electronics $ 23 $ 276 Nightlife/Other Activities $ 20 $ 240
Apartment with three roommates Condo Fees/Maintenance $ $ Pets/Pet Care $ $
Transportation Hobbies $ 20 $ 240
Auto (Loan/Lease) $ 152 $ 1824 Vacations $ 35 $ 420
Used car, commute 10 miles to work
Gas $ 160 $ 1920 Savings
Repairs & Maintenance $ 35 $ 420 4 Savings $ 50 $ 600
When starting out, sharing an License/Registration $ 9 $ 108 Retirement Contributions 5 $ 150 $ 1,800
1 apartment reduces housing and
Parking & Tolls $ 20 $ 240 Other
Public Transportation $ 11 $ 132 Education/Tuition $ $
A great way to save money is Food 6 Student Loans $ 50 $ 600
2 to bring your lunch instead of Groceries/Household $ 307 $ 3,684 Other Loans $ $
Dining Out $ 20 $ 240 Gifts $ 38 $ 456
Even if your employer provides 2 Lunch $ 40 $ 480 Charity/Donations $ 5 $ 60
3 health insurance, you still might Healthcare Childcare $ $
have to pay a a small portion
Medical (Co-Payments) $ 8 $ 96 Taxes
Dental $ 20 $ 240 Social Security $ 223 $ 2,676
4 Don’t forget to pay yourself Medications $ 3 $ 36 Property/Auto $ 20 $ 240
Start saving for retirement now – Personal Real Estate $ $
5 it will pay off in the long run State $ 92 $ 1,104
Clothing/Jewelry $ 17 $ 204
Laundry/Dry Cleaning $ 21 $ 252
7 Federal $ 283 $ 3,396
Pay your student loans on time to
6 establish a good credit history Haircuts/Makeup $ 35 $ 420
Total Expenses $ 2,703 $ 32,436
Health Club/Memberships $ 45 $ 540
7 Remember to budget for taxes
Put it in writing – everything Budget Worksheet
you pay over the course of a
month – and try to account for Expense Monthly Yearly Expense Monthly Yearly
every penny that you spend.
This will give you a good idea Housing Insurance
of where your money goes. Rent/Mortgage $ $ Health Insurance $ $
Electric $ $ Auto Insurance $ $
Telephone/Cell Phone $ $ Home/Rent Insurance $ $
A PDF version of the Water $ $ Life Insurance $ $
Budget Worksheet can be Heat (Oil/Gas) $ $ Recreation/Entertainment
downloaded for free at TV (Cable/Satellite) $ $ Movies/Concerts/Shows $ $
www.playbook.thehartford.com Internet Access $ $ Magazines/Books/Music/DVDs $ $
Furniture/Electronics $ $ Nightlife/Other Activities $ $
Condo Fees/Maintenance $ $ Pets/Pet Care $ $
Transportation Hobbies $ $
Auto (Loan/Lease) $ $ Vacations $ $
Gas $ $ Savings
Repairs & Maintenance $ $ Savings $ $
License/Registration $ $ Retirement Contributions $ $
Parking & Tolls $ $ Other
Public Transportation $ $ Education/Tuition $ $
Food Student Loans $ $
Groceries/Household $ $ Other Loans $ $
Dining Out $ $ Gifts $ $
Lunch $ $ Charity/Donations $ $
Healthcare Childcare $ $
Medical (Co-Payments) $ $ Taxes
Dental $ $ Social Security $ $
Medications $ $ Property/Auto $ $
Personal Real Estate $ $
Clothing/Jewelry $ $ State $ $
Laundry/Dry Cleaning $ $ Federal $ $
Haircuts/Makeup $ $
Total Expenses $ $
Health Club/Memberships $ $
Real World Story: Budgets
“I soon discovered that little things add up quickly . . .”
When you’re part of a sports team, I worked full-time at ESPN and It wasn’t until I began preparing
you’ve got to have a strategy on earned lots of overtime. For the first for graduation – with about $20 in
how to win. Personal experience is time, I was on my own for rent and my savings account – that I started
showing me that the same holds true expenses, with no sense of how to getting concerned about my
for success in managing money. budget or keep track of what I financial future.
In order to win at personal finance, spent.
you’ve go to have a plan – a plan When I accepted my first job after
for spending, saving and, eventually, I soon discovered that little things graduation as a basketball coach
investing wisely. add up quickly – things like gas, for Got Game, a start-up company
going out to dinner, my cell phone that trains kids for AAU basketball
As a basketball player at Boston bill, buying toilet paper and shampoo. tournaments, I made budgeting a
College, I didn’t think much It was a real eye-opener: “I just got top priority. I also mapped out a
about money. My tuition, room, paid, so why am I broke?” I would game plan for saving money while
and board were covered by an repeatedly find myself asking. playing basketball overseas, based on
athletic scholarship and, like many my income and living expenses.
students, I depended on my parents Even after my internship, I did not
back home in Texas for additional adopt a more responsible approach I still have plenty to learn about
spending money. It took just one toward my finances. Back at school money matters, but at least I now
By Aja Parham
small taste of life in the “real world” my senior year, I continued to spend have an idea of how to discipline
– a paid summer internship at without saving. The only thing I myself.
Class of ’06
ESPN – to realize the importance had going for me was that, unlike
of having a plan for my finances. many other college students, I had
no debt. I had steadfastly refused to
get a credit card, so I could not
spend what I did not have.
Understanding credit is crucial to starting off
on a solid financial footing.
transaction – and how well you’ve done mortgage companies, credit It’s a good idea to establish your credit
repaying money borrowed in the past. card companies) offer credit based early and demonstrate your ability to
on your earning power and your repay. Begin by borrowing sensibly.
Before deciding to use credit, consider repayment history. Obtain a credit card and make
whether you are really willing to pay occasional purchases, but pay off the
“rent” on the item you’re buying. FICO Who? bills in full. Also, repay your student
Typically, it’s not a good idea to “rent” In recent years, lenders’ decisions to loans on time. By the time you really
pizzas, movies, gadgets, or other things award credit have become automated need credit, your good credit rating
that are easily consumed, because soon through a computer model called will be well established.
you’ll only be left with the payments. credit scoring. Information compiled by
School loans and mortgages are usually credit-reporting agencies is analyzed and You are entitled to one free
Credit is your ability to buy goods and credit report per year from each
services now and pay for them over worth borrowing for because they converted into a numeric score or letter of the three major credit-reporting
time. In short, it’s a form of borrowing require large initial outlays that can be grade. The most commonly used is a companies. You can purchase a
paid off over time, and you are left score called a FICO score, which stands copy of your FICO score at
money, which you can also think of as
paying “rent.” Just as you would pay with a valuable asset (your education for Fair Isaac Company, the company
rent for using someone else’s house, or home). that created the original scoring model.
credit allows you to “rent” other people’s Boosting Your Score
money to buy things you can’t pay for Your ability to get credit is also valuable. There’s no single definition of a good • Establish a line of credit, if you
yourself. In return, you pay fees and/or When it comes time to pay for big-ticket score, as lenders use different standards. haven’t already
interest as well as the items like cars, homes, But a higher score improves your • Ask a parent to co-sign for a
college, or grad school, if chances of obtaining credit and loan or credit card if you have
money you’ve borrowed. Think of credit trouble initially
How much interest you you’re like most people, qualifying for lower interest rates.
as rent. Before • Pay all bills on time or even
pay can vary with the you’ll need credit, in the ahead of time
type of credit and the deciding to use it, form of a loan. Qualifying, Review your credit report • Pay more than the minimum
moment in time that however, is not automatic. several months before you plan balance due – as much as
consider whether you to apply for a loan. This gives
you make your credit Lenders (such as banks, you can afford
you time to fix any errors that
are really willing to could impact your credit score. • Keep account balances low, pay
the balance in full when possible
pay “rent” on the
item you’re buying.
this is probably the worst use of credit
Repaying Student Loans: Climbing Out of the Hole possible. Contact everyone to whom
Repaying a student loan can be a big chunk of the monthly budget. It’s also you owe money, explain your situation,
a key factor in establishing and maintaining good credit. If your student loan and ask for a payment plan. Most
is subsidized by the U.S. government, there are creditors will react more favorably if
various repayment plans, offering a variety of you act first and in good faith before
monthly payment levels and repayment periods. they mark you as a bad credit risk.
There’s also a menu of programs to help if you
run into trouble. Visit http://studentaid.ed.gov for Non-profit credit assistance groups can
additional information. A non-government loan is subject
help you get organized and overcome
to whatever terms you agreed to when you applied for it.
credit problems. These organizations
typically charge fees based on your fee or those that claim they can “fix”
ability to pay and the level of service your credit or remove negative items
Using Credit Responsibly such as having a high credit card balance
you need. Beware of private companies from your credit report. Negative items
To benefit from credit, it’s important to or too many credit cards, can also have
that promise to “restore” or “repair” your remain on your personal credit report
be disciplined and prudent; consider it a a negative impact on your credit rating.
credit; many are scams. In particular, for seven to ten years unless you can
convenience, not a necessity. Using too
avoid companies that ask for an up-front prove they’re false.
much credit can leave you with monthly Also beware of minimum payments;
charges you cannot repay. If you pay they often give a false sense of achieve-
your bills late – or worse, if your bills go ment. Yes, you are making the smallest
How Much Is Too Much?
unpaid – you might find that collection payment as determined by the credit
An old rule of thumb is that your rent
agencies or the government will fill your company, but you will not achieve
(or mortgage) plus car payments plus
life with frequent requests for payment; your goal of eliminating your debt. loan repayments plus credit card
they can even go to court and force your payments should not equal more than
employer to divert part of your salary to If you find you are unable to pay off 33% to 40% of what you earn before
cover your unpaid bills. Moreover, your your debts, take immediate steps to fix taxes. If it does, take a closer look at
credit rating might suffer, making the problem. Stop using your credit your spending and income and make
lenders reluctant to loan to you when cards. Don’t fall into the trap of borrowing some adjustments.
you really need to borrow. Other factors, on one credit card to pay off another;
The Basics of Credit Cards
Not all credit cards are created equal; it pays to shop around.
What’s the rate? It Never Hurts to Ask Tips to Prevent Identity Theft
What’s the interest rate that will be It’s worth exploring whether a When identity thieves gain access
charged if you do not pay your bill in better deal is available. Often, to your personal information, they
full each month? Rates vary, as do your bank will waive a credit card can open credit cards and make
methods of calculating interest, and fee if you make the request. purchases, incur phone charges,
take loans, and run up big bills.
these differences can affect how much The same is often true in dealing
Follow these prevention tips:
you pay. Read and compare the fine with telephone and cable TV
companies. Ask if there are • Never give out your Social
print of several card offers to see Security number, date of birth,
which is best for you. any promotions or special
mother’s maiden name, credit
deals that could reduce card or bank account numbers
Choosing a credit card is no different
your bill. You’ll to anyone who contacts you.
from shopping around for a car or In evaluating credit card opportunities,
MP3 player. A little research can save you should gauge your own spending • Don’t share information with
how often you
and payment ability. If you always pay anyone who claims you have
you money. There are several factors get a positive won a prize or special promotion,
to consider. your charges in full, a low annual fee or response! or is taking a poll.
no fee at all might be more appealing.
• Don’t discuss personal
What’s the fee? If you carry a balance, lower interest information or place credit card
Does the card have an annual fee? In rates might be more important. orders via cell phones.
some cases, if you have an account at In most cases, it’s best to pay your • Don’t leave charge slips and
the bank offering the card, they might credit cards in full. If you do accumulate In general, the interest you bank receipts for others to see.
waive the fee, so it’s always worth asking. credit card debt, pay it off as soon as would earn in a bank or
other safe investment will be • Shred paperwork before putting
Some cards have no-fee promotions you can – even if it’s at the expense of it in the trash.
less than the credit card
for a given period of time or even your savings. interest rate that you would • Don’t post your resume on
permanently. If you take a short-term pay, so paying the card employment Web sites.
off first is usually a sound
deal, remember to re-evaluate it when • Don’t post personal information
the promotion period expires. on social Web sites.
• Install anti-virus and firewall
protection for your computer.
• Shop online via secure sites,
denoted by “https” only.
Real World Story: Credit
“It wasn’t easy wiping the balance sheet clean.”
Spiraling into debt is like a massive After signing on with an agent from my parents– just to pay off
weight sitting on your chest. You who set me up with an expensive my debt. They helped me set up a
struggle to push it away, but without apartment and a generous line of payment plan, but I was on my own
the proper plan, it just gets heavier credit, I used credit cards to buy to come up with the cash. I also
as you sink deeper into financial things like clothes, dinners at nice turned to a credit repair lawyer to
quicksand. restaurants -- things I thought I show me how to get paid items off
could afford once I scored an NFL of my credit report.
I know this feeling all too well. I contract. But then circumstances
went into debt during college and, changed, my agent dropped me, As part of the plan to improve my
after several years, I’m still wiping and my dreams of going “pro” credit rating, I took on additional
the balance sheet clean. It’s easy disappeared. debt that I could afford to pay off
for college students to fall into the right away. My dad co-signed for
credit card trap – but based on With a $2,000 monthly apartment loans on a house and a car, and I
personal experience, it’s not so lease that I couldn’t afford, I had made all the scheduled payments
easy to get out. to move home with my parents. on time, eventually establishing
My credit card debt was $5,000, good credit.
It all started when I was playing and quickly doubled as a result
football for the University of Florida of the high interest rates. Within This experience proved to be a costly
By Dave Jorgensen
Gators. As an honorable mention 90 days, my credit rating had taken lesson: There are ways to fix bad
University of Florida
All-Southeastern Conference Player a major hit. credit, but it’s not easy. Better to
Class of ’02
in both the Sugar Bowl and Orange learn how to use credit wisely from
Honorable Mention Bowl, I was being recruited by It took a full-time job and two the onset and set yourself up for
All Southeastern Conference agents for the NFL. part-time jobs – along with advice financial success in the future.
Interest: The Cost of Money
It’s all in the percentages; different rates will dramatically
affect your bottom line.
at the chart below shows that a lower Many credit card
companies offer low
rate of interest will yield savings in your The Bargain That’s Not:
interest rates – or even
monthly payments and the total amount no-interest – for fixed Beware the Minimum Payment
of interest you pay for the life of the periods of time. Once the That super-discounted $1,000
loan. promotion ends, a higher spring break trip isn’t so cheap if
interest rate kicks in. you book it with your credit card
If you have a balance,
$10,000 Loan for 3 Years at Various and pay only the minimum monthly
you’re paying a significant
Interest Rates payment. If your card
monthly finance charge.
Interest Rate 4% 6% 8% carries a 12 percent
interest rate and you
Monthly Payment $295.24 $304.22 $313.36 When evaluating debt, list it
pay $15 a month,
When you borrow money or take on Total Interest Paid $628.63 $951.90 $1,281.09 in order of highest interest
rate to lowest. This way, the actual cost of the
credit, whether through a credit card or you'll know which debt to trip will be $2,100.
a bank loan, it’s important to under- The lesson is simple: Shop around for work on paying down first–
stand interest because it can vary from interest rates and add the cost of interest the 18 percent credit card
to the cost of whatever you buy before debt as opposed to the 6
company to company, and can be
percent student loan.
quite costly. deciding how much you can afford. What’s a Parent Worth?
If you buy a used car for $10,000
Here’s an example: Let’s say you’re and take out a three-year loan at
buying a car and you need a $10,000 8 percent interest, your monthly
loan with a three-year term. A glance payments would be $313. If your
Interest Rates: When Low Is Good, High Is parents offered to lend you the
Bad, and Vice Versa $10,000 with no interest, your
We talk about interest rates in several contexts. monthly payments would only be
When borrowing money through loans or credit $278, saving you $35 a month.
cards, a low rate means you pay less for the use Over the three years, your parents
of that money. On the other hand, when you’re will have saved you $1,260.
saving or investing, higher interest rates mean Don’t forget to say thanks to
your money is earning more for you. Mom and Dad.
Finding the Right Job for You
Cover all your bases, consider all your options.
The Job-Hunting Process Job Search Tips Send your resume and cover letter to
Most colleges have career services offices ■ Internet job postings are an obvious potential employers; follow up with
to help you get started, but it’s usually place to start, whether you consult phone calls to make sure it got to the
up to you to do the legwork. The first the major Web sites or sites specific right place and to offer additional
step is to prepare a resume of your to your field. information. Keep notes on your
experience. Make it more than a list of ■ Don’t forget the newspaper’s contacts and the responses you get.
jobs: highlight skills, accomplishments classified ads – and not just your
and personal qualities. Proofread local paper. With most newspapers When you are invited for an interview,
carefully so you can present yourself available online, you can check out learn all you can about the company,
in the best possible light. As your the job market just about anywhere. role-play possible questions you’ll be
Today’s work environment is an job search progresses, tailor different ■ Recruiters offer another option. asked, and think of a few to ask your
ever-changing place; you can expect versions of your resume to specific Talk to those who come to your interviewer. Dress conservatively – a
to hold multiple jobs over a lifetime. employers you’d like to work for. At the campus and research others in business suit is suggested unless you’re
It’s an environment that requires you same time, prepare a cover letter that your field. sure the company has a more relaxed
to take an entrepreneurial approach to can be tailored to specific opportunities. ■
dress code – and bring extra copies of
Check out career fairs both on
employment. Think of campus and in the community. your resume. At the interview, be
your first job as a way Next, start a list of gracious and polite, but also try to relax
■ Networking can be key. Let people
to learn about the Just like choosing employers you’d like to and let the interviewer see your personal
work for. Use a variety know you’re looking; you never best. Always send a thank-you note
workplace and the kind
the right school, know who can offer a boost to a
after the interview. E-mail is acceptable
of culture in which of sources, including
young person starting out. Your
you’ll thrive. choosing the right the career services office, these days, but a typed note via the U.S.
college alumni network is a good
employment to create it. place to begin. mail may help set you apart from other
applicants. If possible, send both.
opportunity is ■ Don’t hesitate to contact companies
you’d like to work for directly. Most
essential. Most colleges have career
company Web sites have a page services offices and advisors
about employment opportunities. who can offer a wealth of
information and help in finding
a job or internship. Many also
host job fairs and schedule
interviews with corporate
Evaluating the Job Offer
Benefits can be as important as the salary.
Just like choosing the right school, Besides evaluating the responsibilities
choosing the right employment oppor- of the job itself, consider the strength Which Job Is the Better Deal?
tunity is essential. While salary is an and values of the company, the
important consideration, it should not training offered, and the advancement Job 1 offers a salary of $50,000 with NO benefits.
be the only one. There are other factors opportunities. Consider where the
to keep in mind when selecting a job, job is situated and the cost of living Job 2 offers a salary of $47,000 but pays 75 percent of
should you have multiple options. in that region. And consider benefits the $350 monthly premium for your health insurance
provided by your employer, such as and contributes 3 percent of your salary to a 401(k).
health insurance, disability insurance,
retirement plans, flexible spending Job 2’s $47,000 base salary may actually be
accounts, tuition reimbursement, worth more than $51,500.
bonuses, and paid time off.
Health Insurance: In evaluating your health coverage for an employee contri- Don’t go without health insurance!
health benefits, find out if the company bution of $100 per month ($1,200 per When you are young and in good
offers medical and dental insurance, and year), the two opportunities might be health, it might be tempting to save
whether it covers just you or your entire more evenly matched than you thought. money and neglect it. However, in
family, if you have one. Also find out if doing so, you run the risk of financial
your employer will pay a portion of the Rising medical costs have resulted catastrophe should a medical emergency
coverage. You might have one job offer in many changes in employee health arise. Remember, if you’ve been covered
for $1,200 more per plans in recent years. by your parents’ health plan, you will
year, in which you are It’s important to likely not be eligible for that coverage
responsible for $200 a
Don’t go without health understand the specifics after graduation. Even if you’re not
month (that’s $2,400 a insurance. Even if it of your employer’s employed, or your job doesn’t offer
year) in health insurance costs a few dollars, it’s benefits plan, so you can this benefit, health insurance can be
premiums. If the other make the most of your purchased independently.
job offers comparable typically wise to take healthcare dollars.
the health coverage an
Flexible Spending Accounts also generally require that you “use it or
Flexible spending accounts (FSAs) lose it,” meaning that you forfeit any
allow you to set aside a portion of your unused funds at the end of the year. It’s
income to pay for certain expenses important to plan for your FSA carefully.
with pre-tax dollars. For instance,
contributions to healthcare spending Retirement Savings Plans
accounts can be used to cover out-of- Many companies offer voluntary savings
pocket medical or dental expenses, and retirement plans such as 401(k),
and contributions to dependent-care 403(b), or 457 plans. These plans allow
spending accounts can be used to you to invest money over the long term
cover childcare expenses while you’re without paying taxes on it until you
working. retire, at which time you may be in
a lower tax bracket. They can also help
What’s the big deal about pre-tax put you in a lower tax bracket right
dollars? When part of your paycheck now, by reducing your taxable income.
is set aside for an FSA, your income at In many such plans, the employer
the end of the year is lower, so you pay matches a portion of the funds you
less in taxes, but you still get to use the contribute, so it’s like getting additional and matching funds you may receive increasingly innovative, so it’s worth
money during the year. Be aware, “free” money. If your employer offers a by enrolling in your employer’s plan exploring both traditional and
however, that these plans voluntary retirement plan, make this a smart move. Put away as unconventional benefits that come
typically require you to When an employer join it immediately. much as you can afford, but if cash is with a job offer to see which make
determine in advance the Retirement might seem tight, try to invest at least 4 to 6 percent the most sense for you.
amount you will set aside
matches a portion far away, but the tax of your income in your retirement plan.
for the coming year. They of the funds you advantages, routine savings, Employee benefits are becoming
contribute, it’s like
Housing You Can Live With
Putting a roof over your head shouldn’t put a big hole in your
wallet – if you think it through.
with having you back? Are they lucky enough to have a friend, or several Make a list of your criteria for a room-
willing to let you live rent-free? friends, who would like to live in the mate. Are you a non-smoker who can’t
Or for a nominal rent? same area. If not, there are roommate- tolerate the smell of smoke? A light
matching services that advertise online sleeper who has to rise early? Or will
Looking purely at finances, moving or in the telephone directory. Find out you work nights? Weekends? Being clear
back home is a great deal, even if your exactly what they cost and what you’re about your preferences will help you to
parents charge a nominal rent. Out in signing up for. select a compatible roommate.
the open market, an apartment renting
for $700 a month would cost $8,400
per year. In addition, you will likely Housing Costs
Home sweet home. After graduation, need a one-month security deposit, and The average cost to rent an apartment can exceed $1,900 a month in some
will you rent an apartment, with or sometimes two months’ rent in advance. of the nation’s most expensive real estate markets – excluding utilities,
without roommates, or move back Utility companies might also require cable TV, or phone bills!
home? It’s not an easy choice, as it deposits. Remember, too, that you’ll Moving back home for a year could save you as much as $22,000!
balances finances with personal freedom have monthly expenses such as utilities,
– a difficult calculation. phone, cable TV, and Internet bills. Average Monthly Rental Prices
You’ll also be responsible for furnishings, New York, NY $ 2,636
There’s No Place Like Home? rental insurance, and food. Even laundry San Francisco, CA $ 2,009
First, ask yourself whether living at expenses will add up if you don’t have Los Angeles, CA $ 1,770
home is an option. After the freedom a washer and dryer. Long Island, NY $ 1,643
of living at school, many students don’t
Boston, MA $ 1,551
want to live under their parents’ rules. Rooming with a Roomie
Do you? Is there still room for you at Another option is to share expenses with Source: Property & Portfolio Research (PPR), 2008 Q3
home? And are your parents comfortable one or more roommates. You might be
It’s a Business Arrangement
Even if you room with a good friend,
A Good Rent Rule
you won’t know what it’s really like to
A rule of thumb on rent is that you should not spend more than 25 to 30
live with a person until you do so. percent of your gross income (your income before taxes are deducted from
It’s wise, therefore, to think about a your paycheck). For example, if you earn $36,000 a year and apportion
roommate relationship as what it 25 percent for rent, you could spend $9,000 per year ($750 per month) on
actually is: a financial arrangement. As rent. If you wanted to go as high as 30 percent, you could spend $10,800
with any contract, you’ll want to spell per year ($900 per month).
out all the rights and responsibilities of
each party. Make up a household budget Earnings Percentage Maximum Maximum
Per Year For Rent Per Year Per Month
just as you made your personal budget.
How much rent will each roommate $36,000 25% $9,000 $750
pay? (Will you split it evenly or will $36,000 30% $10,800 $900
the bigger bedroom, if there is one,
cost more?) How will you split utilities?
How will you handle food? If one found immediately? And don’t forget and one of them moves out, how will
roommate has to move out, how much the non-monetary issues such as that slot be filled? Will the landlord have
notice must he or she give? How long housekeeping, entertaining and other a vote? In cases where all roommates’
will the departing roommate have to basics of daily life. names are on the lease, is the old lease
pay rent if another roommate isn’t invalidated when one leaves and a new
When the Landlord Comes to Call one comes in?
In case of damage, your Then there’s the roommates’ relationship
landlord’s insurance will likely
cover only the building and any
with the landlord to consider. Will the A roommate relationship can be a lot
fixtures it contains, but not lease be in one roommate’s name or all? more complex than it might seem at
your stuff. Renters insurance If there’s one official tenant, it’s doubly first glance. But if all parties understand
will cover your personal property
important to have a written agreement what’s expected and pay their fair share
– your electronics, furniture,
clothes, and household items. between roommates. Or, if more than on time, it can be an excellent way to
It’s generally inexpensive. one roommate’s name is on the lease, start out.
At the end of 30 years, Jack owns
nothing and continues paying rent. Renting vs. Buying
Jill has finished paying her mortgage
Renting Advantages Buying Advantages
and lives rent-free; plus, she also owns
• Don’t need large • Build equity in
real property that can be sold. Real down payment property that could
estate typically increases in value, be sold for a profit
• Not responsible
which means Jill will probably be for repairs • Mortgage interest and
able to sell her home for more than property taxes can be
• Some utilities may
she paid for it. be included
deducted on tax return
• Can borrow against
• Don’t need to find
Another advantage to having a mortgage: buyer before moving
the home’s equity
taxes. You can deduct the portion of
A Mortgage Instead of a Rent your mortgage payment that goes for
Buying a home – whether a house or interest. Usually, in the early years of a
condo – is one of life’s milestones. One mortgage, most of your payment goes Mortgage Basics
major advantage is that when you pay a toward interest. Therefore, you may get When you buy a house, you typically pay a down
mortgage, you are not just paying for a significant tax deduction. payment that can range between 5 and 20 percent
lodging; you are acquiring an asset. of the full price of the house. The rest of the purchase
Let’s compare two students, Jack and Buying a home is probably a few years price is financed by a bank loan called a mortgage,
Jill. Both get good jobs after college. away. For some people, the ease of which you pay back, with interest, each month.
Jack rents for 30 years, while Jill saves renting outweighs the benefits of home Reduced-price mortgages for first-time homebuyers
for a down payment and then buys a ownership; for others, owning a home are often available from federal and state agencies.
home and pays a mortgage for 30 years. is the ultimate goal. Check www.playbook.thehartford.com for links to
information on these programs.