Money advice for new college graduates

Source: More Advice Graduates Don’t Want to Hear By DAMON DARLIN of nytimes.com

Saving while young is critical - the power of compounding. If you start saving now, it will build to a larger nest egg by the time you are 65 than if you wait to start at 45.

Put $250 a month for 40 years in a IRA or a 401(k) and you will receive about $500,000, assuming a 6% return. Start at age 45 and you would have to put in $1,078 a month to generate the same amount by age 65.

But there is another compelling reason to get into the habit of saving. People who save a lot get used to a frugal life while working, so less money is needed in retirement.

If you are only making $40,000, a not-untypical starting salary for a college-educated professional in a big city, the weekly gross of $769 works down to $561 in take-home pay after income taxes and payroll taxes for Social Security and Medicaid.

Were you to divert 10 percent of your salary to a 401(k) plan, the bottom line becomes $509.

In other words, a regular habit of savings costs you only $52 a week.

You could easily frittered that away last week on things that you cannot even recall this week. Could you save another $50 a week? If you do, you are nearly set for life.

More advice

Never pay a real estate agent a 6% commission.

Buy used things, except maybe used tires.

Get on the do-not-call list and other do-not-solicit lists so you can’t be tempted.

Watch infomercials for their entertainment value only.

Know what your credit reports say, get them free on to http://www.annualcreditreport.com/.

Consolidate your cable, phone and Internet service to get the best deal.

Resist the lunacy of buying premium products like $2,000-a-pound chocolates.

Lose weight. Carrying extra pounds costs tens of thousands of dollars over a lifetime.

Do not use your home as a piggy bank if home prices are flat or going down or if interest rates are rising.

Enroll in a 401(k) at work immediately.

Postpone buying high-tech products like PCs, digital cameras and high-definition TVs for as long as possible. And then buy them during the selling season - such as the Black Friday - they often are on sale.

And, make your own coffee.