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Ohio Today

Nickels and dimes
Your college days brought nothing but Bobcat green. If you're seeing red now, you could use this financial advice.

Mike Gennaria and Joan Slattery Wall

For many recent college graduates, the excitement of graduation quickly turns to worry as added responsibilities arise.

Where will I get a job? Will I be able to make it on my own? Can I handle my own finances?

Lowell MacKenzie, BSCO '62, has some tips for this last question. MacKenzie, who lives in Columbus, has worked for the MONY Group, a financial services company, for 43 years. He is a Chartered Life Underwriter, professional credential awarded by The American College in Bryn Mawr, Pa. He was inducted into the Society of Financial Service Professionals' Hall of Fame in 2001.

His knowledge of finances also extends to his own experience: "I personally have never paid interest on anything, except my home, my whole life," he says.

Nellie Mae, a national provider of college loans, reported that in 2001, graduating students had an average of $20,402 in combined education loan and credit card balances. The median credit card balance was $1,770, up 43 percent from 2000. The interest rates on credit cards have ranged from 7 to 20 percent over the last 13 years, MacKenzie points out, and those charges can add up quickly.

"Sometimes people are paying just the minimum payment ... so then they wind up paying interest on interest. If you cut out $200,000 in interest payments over a lifetime and have that money working for you, that savings adds up to a lot of money."

Here's how he'd advise recent college graduates to put his financial wisdom to work.

First, MacKenzie says, you have to pay off any college debt. He says there are two ways to go about paying off student loans. You can choose a period of time in which you want to have the whole loan paid off and then figure out how much you will need to pay each month. Or, you can decide on a certain amount you can pay each month and then figure out how long it will take. After choosing a method, MacKenzie stresses, "You have to get started and stay with it."

He also emphasizes that recent graduates must stay within a budget.

"If you spend more than you're making, it will not take long before you have real financial problems," MacKenzie says. Overspending often happens when the recent graduate lacks a financial strategy.

"If a person went on a trip and they didn't have a map, it would take them a lot longer than if they had a map and a plan," MacKenzie explains. This trip without a map is how many young professionals navigate their finances, he says.

To avoid this, MacKenzie says, "You must pay yourself first." He explained that a young person has to "get into a habit of saving a certain percentage of everything you make."

MacKenzie says a nice start would be to save 10 percent of all after-tax earnings, but he also acknowledged that may be impossible for some graduates working on a tight budget. He stressed that recent graduates need to start with an amount they can maintain on a monthly basis. This payment to yourself each month can be treated like another bill, eventually providing a down payment on a house or car.

"Saving is habit forming," MacKenzie says. "Unfortunately, some recent graduates have begun to realize that not saving is also habit forming."

Mike Gennaria, MSJ '03, is the former Ohio Today Online graduate student writer. Joan Slattery Wall is assistant editor of Ohio Today.

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