College graduates may have less to celebrate this year. Between the challenging job market and the elevated levels of debt that many face, it is easy to see how it would be difficult for grads to make the move from a “college career” to a "real career."
According to a survey by Accenture, the job market is so tough that only 11 percent of those graduating had secured a job two months prior to graduation. With most student loans requiring that payments begin six months after graduation, many students face an uphill financial battle.
Bottom line: A unique blend of job skills, drive and creativity may be required for college grads to succeed in this economy.
In order to determine how to accomplish your goals, it is often a good idea to have a clear awareness of the challenges ahead.
So why is the job market so tough for new grads? First, with 7 million jobs missing from the economy, the U.S. labor market is still reeling from the aftermath of the financial crisis. The unemployment rate and underemployment rate among recent college grads is 8.5 percent and 16.5 percent, respectively. With an unemployment rate of 22.9 percent and an underemployment rate of 41.5 percent, the market is even tougher for those with a high school diploma alone.
For graduates fortunate enough to secure employment, wages have been steadily declining. According to the Economic Policy Institute, since 2000, the real (inflation-adjusted) wages of young high school graduates have dropped 10.8 percent, and those of young college graduates have dropped 7.7 percent. While real wages have declined, the amount of student loan debt is on the rise. In fact, total outstanding student loan debt in the U.S. has increased 13 percent to over $1.11 trillion, with the average student having nearly $33,000 in debt. Low wages coupled with high debt can be tough to overcome.
It is critical for new graduates to establish a game plan to rise above the challenges they face. Utilizing a proactive approach to financial planning and job hunting may help improve their likelihood of success. New graduates may want to begin by understanding their current financial position while establishing goals for the future. When do they plan on moving out? What are their 1-, 3-, 5- and 10-year career goals? Consider establishing a current budget which highlights student loan debt payments and a future budget which may incorporate the expenses associated with living independently.
Graduates should begin to work toward building a cash cushion while also avoiding new consumer debt. While many recent grads may not enjoy “the money talk,” moving back in with Mom and Dad after being away at college can be a powerful motivator toward improving their financial position.
After minimizing expenses, the next economic lever to address is how to improve income. Finding a job in the age of technology can be more or less challenging depending on how you approach it. First, most companies require that you file applications electronically where your resume becomes one of several hundred in a digital stack hoping to be noticed — good luck. This market requires a “get-out and make something happen” attitude to succeed. College grads should consider thinking outside the box.
Leveraging social media, a tool many young people have embraced, can certainly help. Consider utilizing professional networking tools such as LinkedIn which may help graduates connect with key decision makers that may help them to secure a job. Utilizing their university’s center for career development or job placement department coupled with alumni networking may also improve their chances of success. Remember, graduates have to figure out a way to stand out from the “resume stack” to succeed.
While the labor market is tough, slow improvements continue to be made and, hopefully, we are on the road to recovery. Improving the financial awareness of graduates may help empower them to employ a proactive approach to reaching their goals. Since everyone's situation is unique, consider speaking to your financial adviser to determine the most appropriate approach for you.
Kurt J. Rossi, MBA, is a Certified Financial Planner Practitioner and Wealth Advisor.
He can be reached for questions at (732) 280-7550, kurt.rossi@Independentwm.com or
www.Independentwm.com. LPL Financial Member FINRA/SIPC