Joe Keating is the chief investment officer at RBC Bank in Raleigh.
As the class of 2009 graduates from college this month, they face the worst recession in the post-World War II era and an unemployment rate that could hit 10 percent in the next year. If that wasn't enough bad news, many newly minted grads are coming out of school with thousands of dollars in debt.
The average college student graduates with approximately $20,000 in student loan debt, according to the Project on Student Debt, and $2,200 in credit-card debt, according to student loan provider Nellie Mae. A 2008 survey conducted by market research company Zogby International and TrueCredit .com revealed that 23 percent of students have more than $5,000 in credit-card debt and that 10 percent graduate with credit-card debt exceeding $10,000.
It is extremely important that college graduates understand how to pay down debt so that they are better prepared to enter this challenging economic environment.
Here are a few tips on how to pay down debt:
Set a budget and stick to it. New grads need to examine their monthly expenditures and determine what expenses are needs and what expenses are wants. Set aside money to pay down debt and to cover expenses that are needs.
Work on paying off credit cards first. Credit cards have higher interest rates than student loans and should be the first debt to go.
Make extra payments. The graduation checks from family members, the birthday checks from mom and dad -- put those toward credit cards and student loans rather than a trip to the mall or Best Buy.
Use cash, checks or debit cards for all purchases and payments. Studies show people are less likely to overspend when they use cash.
Live frugally. To save money, consider sharing living arrangements with friends or family; cutting back on cable television packages; using public transportation rather than owning a car, if possible; trimming your monthly mobile phone bill; canceling the land-line telephone; taking your lunch to work and eating more dinners at home; skipping the coffee shop espresso drink and going for the office java; using coupons; shopping at second-hand stores or consignment Web sites.
Take a second job. Consider taking a second job at night or on the weekends to speed up paying off debt. If jobs are hard to find, think about services you can provide for busy friends and neighbors like picking up dry cleaning, dog walking, baby-sitting, cooking and housekeeping.
Sell things you don't need. The iPod, stereo or computer you aren't using; clothes that you rarely wear; shoes and handbags that are cluttering your closets; furniture and home accessories you don't have a place for -- all of these items are great for local consignment stores or resale Web sites.
What's your social-networking value?
Richard Pachter, who reviews business books for The Miami Herald, offers this take on "The Whuffie Factor: Using the Power of Social Networks to Build Your Business" by Tara Hunt (Crown Business, $25).
According to Wikipedia, "Whuffie is the ephemeral, reputation-based currency of Cory Doctorow's science fiction novel, 'Down and Out in the Magic Kingdom.' This book describes a post-scarcity economy: All the necessities (and most of the luxuries) of life are free for the taking. A person's current whuffie is instantly viewable to anyone, as everybody has a brain-implant giving them an interface with the Net."
Though the term seems annoyingly cute, Tara Hunt's eminently readable book does a terrific job of explaining this slightly counterintuitive notion, which might be expressed as "the more you give, the more you can get."
Starting out as a blogger, Hunt slowly built some capital of her own as she connected and interacted with a bunch of online contacts. She assisted people with their businesses, causes and other concerns, and accumulated lots of virtual brownie points along the way. When she was hired to develop and expand a startup firm's Web initiative, the enterprise boomed, and her reputation was established in the business sector. She subsequently partnered with a colleague, established a consultancy and was encouraged to write this book on her experiences and insights.
Facebook, Twitter, blogging and the rest are all ways to connect and interact, but if you spend any time with these media, you've undoubtedly encountered virtual or actual "friends" who repeatedly post what they're doing with links for you to click that will take you where they want you to go to sample whatever delightful thing they've encountered or created. The problem, of course, is that there are always a few jokers who do this to excess and provide little that's of value, except, of course, to them.
Hunt cracks the whip here and pointedly shows how this type of behavior adversely affects the value of an online persona and the attendant accumulation of whuffie. In fact, Hunt makes it pretty obvious as she offers an actual table of whuffie "deposits" and "withdrawals" to demonstrate how one can parlay contributions into a major score -- an introduction to Wikipedia founder Jimmy Wales, for example.
In addition to the mechanics of the subject, Hunt takes it to a higher plane by discussing the notion of having a bigger purpose, rather than merely pursuing a mercenary course. And that's the difference here; the time-honored sales tactic of "asking for the order" becomes outdated in this setting. Helping people achieve their goals while pursuing your own is the way to go.
That doesn't mean that one cannot profit from this creation of good will. Far from it! One-way exchanges of value -- products or services for cash -- still exist; you don't necessarily need to build a close personal relationship with Steve Jobs, for example, to enjoy your iPod Touch. But there are implicit promises made by companies that can serve as catalysts for commerce. In addition, establishing connections with buyers and other stakeholders has emerged as an important element of commerce.
As "The Cluetrain Manifesto" authors stated nearly a decade ago, "marketing is a conversation." Tara Hunt's book can help businesses and individuals gently break the ice.