Life Events Guides - Entering The Workforce

Student loans. It's payback time.
You've got the education. Now it's time to start paying for it. Easier said than done. But the following information may make paying back your student loans just a little bit easier.

Exit interview
If you have taken student loans, you will be required by law to receive an exit interview. This is simply a time to meet with a financial aid advisor to discuss your repayment obligations and options. You may think you know enough about your loans. After all, you have to repay them. What else do you need to know? But don't miss this opportunity to learn more about the repayment requirement and what steps you can take to make the payments easier to handle.

If you can't make the interview, don't worry. You might be able to have the information mailed to you and talk to an advisor over the phone. You may also be able to get the information and interaction on the Internet.

Hurray for grace periods
Because most college students don't get jobs immediately after graduation, you will be granted a grace period of about six months after you stop attending school during which you won't have to start repaying your student loans. It doesn't matter if you graduate, quit or just take some time off; you have six months.

Take this time to organize your finances and evaluate your options. If you plan to go to graduate school, ask the lender to defer your payments until after you finish. If you are unemployed, you can ask for a deferment until you find a job.

You should also use this time to make sure your repayment terms are clear. Write or call the lenders to confirm the address and the amount of payment. Once you start paying, you don't want any hassles concerning misdirected payments.

Organize your paperwork
Create a file of all the important loan paperwork. Also, create files for all important financial matters including your income, assets, expenses, debt and taxes. Keep these files for a minimum of seven years.

What are your repayment options?
There are many different ways you can arrange your payment schedule, depending on what you can afford. The standard payment plan, if you can afford it, will offer you the lowest total loan cost.

A graduated payment plan will start you out with lower payments that increase as time goes on. Hopefully your income will increase with time, as well, and you'll be able to keep up with the payments. Because it takes longer for your principal to decrease, you will pay more interest with this option.

Income-based payment plans are similar to the graduated plan. But the monthly payment amounts are tied directly to your income instead of rising gradually no matter what your income.

Extended repayment will allow you to make smaller payments for a much longer period of time. If you don't expect to be able to pay your loan for quite some time, this may be the option for you. But keep in mind this will dramatically increase the term of the loan and, more importantly, greatly increase the total interest paid on the loan.

Consolidation of your loans may actually lower the total amount you pay on your loans. If a lender can offer you a lower interest rate, and combine all of your loan payments into one convenient payment, you could save a lot of money over the life of your loan.

The big no-no: default
It may be tempting to forget about your loans. You've never seen loan defaulters on America's Most Wanted. But if you don't pay your loan for six months, your school will send the collectors after you, your credit rating will be shot and the IRS will withhold any tax refunds you might be entitled to. These results may not seem like a big deal to you now, but they will greatly limit your possibilities for the future - no car loans, no mortgages, no new credit cards. It's just a bad idea all around.

Reduce what you owe
As an unemployed recent college graduate, you may have much more time than you have money. You can use that extra time to pay off your loan by volunteering for certain government projects.

Americorps
If you like the idea of the Peace Corps but don't want to leave the country, Americorps is for you. You can receive up to $7,400 for living expenses and, after a year of satisfactory service, $4,725 to be used toward education. The education award can be used for future education or to pay off previous education debt (your student loans). The work itself can be reward enough: cleaning up the environment, helping at-risk children and other positive community-building services.

Peace Corps.
The Peace Corps. not only allows you to visit exotic locations (Third World countries) and challenge yourself (endure difficult conditions) but you can cancel a substantial portion of your Perkins loans in return for service. You can receive a 15% cancellation on each of your first two years and 20% on your third and fourth years. That's a 70% reduction for four years of service. You do have to contact your lender in advance of your term of service to receive your cancellation credit.

Military Service
The Army, Air Force, Navy, Marines and the National Guard all offer education assistance programs. Check with your local recruiter to find out how these programs can help you.

Teaching
Depending on where and how long you teach, you can receive complete loan cancellation or at least a deferment of some loans by filling some understaffed teaching positions, including teaching in schools serving low-income students or teaching certain subjects in which there are a shortage of teachers.

Legal and Medical Service
If you choose to study medicine or law you can rack up some hefty education loans. But there are programs that offer partial cancellation of loans for public service.

Finding the Right Job
You didn't work this hard to end up taking just any old job. You want a job that is right for you. Otherwise you could have skipped college and just taken the first thing that came along. Finding the right job for you will be a big project. But you've already come this far, so you might as well go the extra mile and secure yourself a good job while you're at it.

Where to start?
Visit the career center at your school. That's the point of a career center - to find students jobs in their field of study. Sign up for on-campus interviews. Recruiters from major companies often visit college campuses looking for good prospects. It's a great way to get your foot in the door of otherwise hard-to-reach employers.

Headhunters and employment services can be a good yet expensive source of job leads. The good news is, they don't get paid unless you get a job, so they're going to do their best.

The phone book is an under utilized source of job leads. Decide what types of companies employ people with your skills. Then look for those companies in the Yellow Pages. Call up and ask for their human resources department.

Networking has become a buzzword in professional circles - for good reason. Many of the best jobs are never advertised. You just have to know the right people. So the key is to get out there and meet the right people. Don't be afraid to ask everyone you know. Type an e-mail stating exactly the type of position you want and send it to everyone you know. You'll be surprised how supportive your friends, family and even casual acquaintances can be. After all, everyone has been there at one time or another. If they can't immediately connect you with a job, they can often provide some valuable advice on where to look and whom to talk to.

What job do I want?
Take time to think about not only what job you want now, but to imagine your possible career progression. Beyond earning a paycheck, what do you want to get out of a job? What skills do you want to learn and what experiences do you want to gain? Look past your first job to the next step of your career. What job will get you closer to that step? Also, while salary is an important part of a job, look at the benefits associated with your job. A high-paying job with no benefits may not be as advantageous as a lower salary with a complete benefits package.

Where are you willing to go?
If you want to stay close to home, your job prospects may be limited. If you want a job in an advertising agency and you live in New York City, you have many opportunities. But if you want to be a fashion designer and you aren't willing to move out of North Dakota, you may a have some trouble finding a job.

If you plan to move to another city for employment, take into consideration the expense of that move. First, different areas have different costs of living. The lifestyle that $30,000 a year affords in San Francisco would take only $20,000 a year to maintain in Cleveland. If you are offered a salary, make sure you can live on that salary in your new city. Moving costs are another factor to take into consideration. If your prospective employer isn't going to pay your moving costs, make sure the salary will make up for these costs in the long run.

When should you start looking?
Start looking now!!! Some experts recommend looking for a job six to nine months before you want the job. But, in reality, you should never stop looking. Constantly keep your eyes open for new opportunities. Keep networking and building your list of contacts. You may decide not to work immediately upon graduation. But it sure would be nice to have the opportunity if you change your mind.

The resume
The first thing you need is a resume. Absolutely everyone that may hire you will ask for a resume first. It will let potential employers know quickly if you have the experience and qualifications for the position they want to fill. Include your education, your work experience, other applicable experience outside of work and any awards you may have received that attest to skills applicable to the job you are seeking.

The wording of your resume is also very important. Make the resume dynamic. Use action verbs. "Managed all inventory," sounds more active than "in charge of all inventory." Keep in mind who will be reading this. Employers receive many resumes. They want a resume that speaks to them. But they're also very busy. So be concise. They would much rather read one well-written sentence than four describing the same thing in more detail.

Beyond the contents of your resume, its appearance is just as important. Your resume is all an employer knows about you. It represents you. So if your resume is unorganized, the employer will assume that you are unorganized. If your resume is well-thought out, organized, and pleasing to the eye, the employer will assume you have strong organizational skills and attention to detail.

The interview
If your resume is well-done and your experience matches what the employer is looking for, you have a good chance of making it to the next step of the process - the interview.

The key to success in an interview is to be prepared. Research the company as well as you can. Know what they do and how they do it. Be prepared to share some of what you've learned about the company in your interview. Also, take your knowledge of the company and determine how you fit in. How can your skills help the company? That is likely to be one of the questions asked in your interview.

Also research the standard interview questions and be prepared to answer them. What is your biggest weakness? Where do you see yourself in five years? There will be questions you don't expect. But at least you can be prepared for some of them.

Decide what you want to know about the company. Have questions prepared to ask at your interview. You want to give the impression that not only are they interviewing you, you are interviewing them.

If you come into the interview prepared not only to answer questions but to ask questions, you will appear more interested and confident - two very important qualities in the workplace.

Paperwork
When you first get a job, the paperwork you must complete can be overwhelming. But if you take them one by one, they really do make sense.

W-4
The W-4 form is a federal tax form that determines how much tax is withheld from your check. One space in particular has a large effect on how much is taken out of your paycheck - the number of dependents you claim. Dependents are those people that are financially dependent on you - meaning that you pay more than 50% of their support. You count as one dependent if you support yourself. Children can count as dependents but only one person can claim each child. So if your spouse claims a child as a dependent, you can't claim that child, too. Your spouse may also count as a dependent.

The fewer dependents you claim the more tax will be withheld from your check. This number doesn't affect how much you are taxed at the end of the year - only how much is held from your check to pay your taxes at the end of the year. So, if you want to make sure you don't end up paying a large amount of tax in April, make this number 1 or 0. But if you'd rather have a larger paycheck and you can handle owing a little tax at the end of the year, claim the number of dependent exemptions that you are entitled to on your W-4 worksheet.

I-9
The I-9 is a federal form that the Immigration and Naturalization Service requires. It ensures that you are a United States citizen or, if you are not, that you are eligible to work in this country.

If you are a United States Citizen, you will need to prove it with a passport or two other forms of ID as listed on the I-9 form. The most common proof of citizenship is a drivers license and Social Security card.

If you are not a citizen of the United States, you will need to prove that you are authorized to work in this country. The I-9 lists which documents are acceptable proof of this authorization.

Health insurance
If your employer offers health insurance, you will be required to complete a health insurance application. This is a hefty form and you'll need to give a complete medical history, including hospitalizations, injuries, medications and other details. It may seem like a lot of trouble to go through, but if you end up needing medical attention, you'll be very happy you don't have to pay for it all yourself!

Life insurance
Life insurance can be difficult to think about. It forces us to think of our own death, something many of us like to pretend won't happen. Of course, it will happen but we don't know when. That's where life insurance comes in. If people are depending on your salary, and you suddenly die, not only do they have to deal with the emotional impact of losing someone they love (we'll assume they love you at this point) but they also have to deal with the loss of financial support that you provide.

So think about who would be financially affected by your death the most. This should be your beneficiary - the person who receives payments from your life insurance policy if you should die. If you have a spouse, the law states that that person must be your beneficiary or sign a waiver of that right. Otherwise, you're free to choose. Girlfriends and roommates do not usually make good beneficiaries because those relationships can change quickly. If you don't have a spouse and kids, you may want to list a parent as your beneficiary.

401(k)
If your company has a 401(k) program, you'll get paperwork for that, too. Read it over and sign yourself up! A 401(k) program is a great way to start saving for retirement.

A 401(k) plan allows you to take money out of your paycheck and put it into an investment account. You are not taxed on this money until you take it out of the 401(k) account, hopefully when you retire and are in a lower tax bracket.

Some employers also provide matching funds, up to a certain percent of your income. So, for example, if your company offers 50 cents on the dollar up to 3%, that means if you put $50 a month into your 401(k) account, your employer will add an additional $25 to your account. But if you earn $2,000 a month, the maximum your employer will contribute is $30 a month.

The money your employer contributes to your 401(k) account is not automatically yours. You have to be "vested." To be vested, you have to stay with the company for a certain length of time according to the schedule your employer determines. After that time, any money your employer contributes to your 401(k) money IS yours.

One more important fact about 401(k) funds - if you decide to withdraw your money BEFORE you retire, you will pay a 10% penalty to the IRS and be taxed on that money. So only withdraw money from a 401(k) as a last resort! Your employer may allow you to borrow money from your account, without penalty. Even though you will pay interest on the loan, the interest goes right back into your account so you don't actually lose any money by borrowing. Borrowing will, however, slow the growth of your investment.

Paycheck
Just about the only downside to making more money is that you have to pay more taxes. That salary that you've been promised is before tax. What you get after tax seems like some kind of practical joke. It's actually practical life.

The federal government withholds Social Security tax, to pay Social Security benefits to retired and disabled people. They also take out Medicare tax, used to provide health care and hospitalization to the elderly and disabled. Then they take out your federal taxes, which goes toward providing everything from highway repair to student loans (remember those?). Your state and local government will also take out taxes.

Then the rest of the money is yours, right? Um…not yet. If your employer doesn't pay 100% of your benefits, such as health and life insurance, the amount you are responsible for is taken out of your check. If you're making 401(k) contributions, those will also come out of your check.

Now the rest is yours to take home, pay the rent, buy groceries, put into savings..

End of the year taxes
Your employer has one more form for you. You'll receive a W-2 form from your employer sometime in January. This will be a summary of your income for the year as well as all the taxes and other deductions that have been taken out. You will need to submit a copy of this form with your federal, state and local taxes.

Ah, yes. Time to do your taxes. The W-2 form is just the beginning. You could just hire an accountant for $100 or more and not worry about it yourself. But for accountants to properly do the job, you have to provide them with your deductible expenses. Hopefully you saved your receipts throughout the year and so you can add them up and provide your accountant with a list. Which receipts should you save? Therein lies the problem. If you have to learn which receipts to save in the first step, you might as well just go the extra step and do your own tax return.

Here are some rough guidelines about which expenses are deductible:

Medical expenses
If you have medical expenses that exceed 7.5% of your adjusted gross income, they are deductible.

Home office expenses
To claim this deduction, you must have a space in your home that you use regularly and exclusively for business. If so, you may be able to deduct part of your utility bills and insurance as well as part of your rent.

Job search expenses
Printing fees, postage, phone calls, travel expenses and other costs associated with finding a job are deductible. (The expenses of finding your first job after you leave school don't qualify, however.)

Moving expenses
If you moved because of work, either to a new job or to a new location for an existing job, your expenses can be deducted.

Auto expenses
When you use your vehicle for business travel, excluding the commute to and from work, you can take a per mile deduction. Mileage deductions change frequently so make sure you are using the latest figures.

Charitable deductions
Any money you give to a charity and don't receive anything in return is deductible. Auto expenses related to charity work are also deductible, though at a lesser rate than business auto use.

Tax-preparation fees
If you hire a tax professional, the fee he or she charges you is deductible.

Professional dues
If you're a member of a professional organization, the dues you pay are deductible.

Subscriptions to professional publications
Any journal, magazine or other publication that you subscribe to for business purposes can be deducted.

There are other rules that you will need to know to file your taxes accurately. Get the tax forms and read them completely and carefully. If you still believe you can't do your own taxes, then hire a professional. At least you tried and probably learned a great deal about ways to save on taxes throughout the year.

Budgeting your money
Now that you're receiving a pay check, it's time to decide what you're going to do with that money.

Good spending habits
Your whole financial situation has just changed. Your spending habits have not yet formed. Why not start out with smart spending? It will be much harder to trim back your spending later.

Review your budget. See if you can save more money. If you have school loans, try paying a little extra on them. Since your money and your debt have a long time to grow, every little sacrifice you make today will pay off much larger in the future.

Rearrange your priorities
The clothes that got you through college probably won't cut it in your new job. You'll need to spend more money on clothes. So where is that money going to come from? You're going to have to cut down on spending in other areas. Once you have your own kitchen, maybe you can cook more and eat out less. Have friends over instead going out to bars and restaurants. There are all kinds of ways to save money. You have to decide what's important to you, and where you can cut costs.