Financial Balance

The past five years has been one of the toughest times to start a career for the recent college graduate. For instance, law school students are graduating with debt from law school and bar exam prep courses.  By the time, students get admitted to practice law, they are likely in debt. The amount of debt many new attorneys accrue is rising each year as the cost of education continues to increase.

When speaking to new graduates about their finances, the ability to manage debt is their most common worry.  In this economic recession, with consolidations in technology, banking, legal, and other industries, many experienced individuals out of work, and some graduates get paid as little as $25/hour.  Having a full-time job with medical benefits is an accomplishment in itself.

A new graduate needs to stay out of bankruptcy by mapping the financial future as early possible after graduation.  Speak to a professional financial planner, bankruptcy attorney, or banker for advice.  Ask family, colleagues, or friends for an introduction to a trusting financial professional.

A financial planner or bankruptcy attorney who is experienced in business and tax can advise on how to balance finances to steer clear of more debt that may make it difficult to carry out future goals such as buying a home, obtaining a line of credit, or taking out a partnership loan.

For the new graduate starting a business on his/her own such as a software company, coffee shop, or bar exam preparation service, being able to pay bills on time will earn trust with those the entrepreneur does business with.  No one wants to get paid late.  Being able to pay invoices upon receipt generates special favors with business partners, and keeps hard workers away from competitors.

To get into good financial shape, create a balance sheet.  A balance sheet lists all assets and liabilities.  Create a personal cash flow statement.  The balance sheet should detail all liabilities with corresponding interest rates on student loans, credit cards, and other debt.   The balance sheet should list all assets such as cash, real estate, stocks/bonds, and personal items of value.   Subtract the liabilities from the assets.  The resulting number will be an individual’s net worth. If the number is negative, in the cash flow statement, detail every monthly recurring expense such as coffee, rent, car payments, insurance, student loan payments, dry cleaning, utilities, meals out, groceries, and entertainment expenses.

To get out of debt, deduct the monthly expense total from the net after-tax income.  This is the take-home pay.  To get to a positive number, trim the expenses by getting rid of unnecessary expenses and reducing overhead fixed costs such as rent, insurance, and entertainment.

Consult with an experienced bankruptcy attorney to learn how to wipe out debt.