Financial Lessons for College Grads

By Mike Brody/ MYFOX NATIONAL

As thousands of college graduates prepare to enter the working world this summer, many will begin to earn more money than they ever have in their lives. What's a grad to do with the new cash?

It's easy to blow money on going out or shopping. But here are seven tips to help college grads make smart money decisions.

• Owning individual stocks is a gamble -- Buying stock in just one company is risky. You might get lucky and buy it at just the right time like those who bought Amazon stock early on and made millions. But you might get in at the wrong time and suffer major losses like many who bought AOL too late. Your best bet is to invest in index funds. When you own an index fund, the good-performing stocks balance out the bad ones, and you get the market average in return.


• Don't wait to contribute to a retirement account -- Setting up a 401(k) is one of the best things you can do. Although most people know this, they sometimes put it off. Because of compounding, employee-matching and other factors, procrastinating will cost you.


• Know what you own in your 401(k) -- Opening a 401(k) account is important, but knowing what funds are in that account is just as important. Look into the details and make sure the portfolio is right for you. Watch out for outrageously high fees known as expense ratios. Getting the right mix of funds is important, too.


• Pay down your credit cards -- Don't just make the minimum payments on your credit cards. The higher the balance you carry, the more interest you'll be paying. Even paying just a little bit more each month can save you thousands in the long run.


• Build good credit -- Your credit score matters more than your GPA. Having good credit will help you get a better interest rate on credit cards, qualify for a mortgage and get a car loan. It's important to not only have a clean credit report but one with some bulk. Using credit cards in moderation and paying them in full when at all possible will accomplish both of these goals.


• Live within your means -- Saving is a form of freedom. Having money to fall back on in case the unexpected happens will allow you to better cope with whatever life throws your way. The more money you save, the less you may have to borrow later on. If you have a hard time not spending whatever is in your pocket, consider setting up automatic withdrawals that will put money into your savings account before you even see it.


• Find the best deal -- There are a lot of ways to save money on the things you need everyday. By doing some research and planning ahead, you can usually find what you need for less. Tax credits and deductions can help you pay off student loans and get you headed toward financial independence.