Here is my top 10 advice for new college graduates with regards to credit cards, money, finance and career choice. If I could turn back the clock, this is what I would have done better.

1. Pay Your Credit Card Bills Fully and Your Other Bills On Time

Yeah, sounds pretty simple. But in truth, many people do not have the habit of paying bills on time because they are disorganized. Find a way to be organized because regular late payments hurt your credit score.

Paying your bills fully (especially credit card bills) is one of the most important habits you can prick up. People who do not get into this habit simply lack budgeting and financial acumen. This lack of discipline manifests itself in not watching what you spend, pampering yourself with little things like drink with friends (which add up), Venti Starbucks. Think about it, the typical interest on credit cards is about 18%. Most of us have a hard time picking stocks whose growth will exceed 12%. Can you imagine borrowing at 18%?

2. Run Your Finances Like a Business

Yep. That means having a budget (and sticking to it), watching every penny. It also means categorizing your bills from the most important to the least important. Your rent, insurance payments, utility bills are the most important. As with any business, there is always an …..

3. Emergency Fund - start establishing one right away

Yes, your first priority is to establish an emergency fund for about six months. Every business always has an ‘cash on hand’ or ‘lines of credit’. And should you as an individual. Start saving for this fund right away before you think about investing.

4. Have a plan to pay off Your Student Loans

If you have student loans, you should devise a systematic plan to pay off the loan as soon as possible. You want to get rid of this burden as soon as possible.

5. Set up automatic enrollment for bills with your credit card

Put your bills on automatic payment to ensure you do not miss paying your bills. You can either choose to have your bank automatically pay the bills or better still, charge the bills to your credit cards. That way, if there is any dispute, bills on your credit card are easier to handle. You can also earn reward points or cash rebates with a cash back credit cards.

6. Talk to your partner about money and finances if you are living together

For all the love that you feel for each other, money is one of the major causes of breakups, divorces and many unpleasant things. Talk to your partner about money matters early in your relationship. It is tough enough, budgeting, sticking to a budget, thinking about your career and all that stuff. It is even tougher for two to agree on this matter. But you must talk about it.

7. Get a Cash Rebate Credit Card

If you have managed to build a decent credit history upon graduation, then you should consider getting a cash back credit cards, which pays you a certain percentage that you spend on the card back in the form of cash rebates. Don’t use that as an excuse to overspend, but careful use of such cards can earn you some nice change at the end of the year.

8. Build Your Credit History if you have not

While critics have always claimed that credit card companies lure students with credit cards and easy credit, the truth is that there is never a better time to get a credit card than when you are a student. Firstly, most (if not all) student credit cards have no annual fee. Try getting a credit card after you graduate if you have no credit history. You will most likely have to apply for a secured credit card (which comes with an annual fee). If you are reading this and are still in college, it is best you get a college student credit card to build your credit history.

9. Monitor Your Credit Reports and Scores

Develop the habit of monitoring your credit report regularly. Understand what goes into your fico score. You can get a free copy of your credit report from each of the credit bureaus every year. If you are planning on taking a loan (auto, mortgage etc), it is best that you monitor your credit score six months before and take steps to improve your credit. There are lots of services (which charge a monthly fee) that lets you get your credit score from the three bureaus. For example, Equifax Credit Watch™ Gold with 3-in-1 Monitoring alerts to changes in your reports and also provides some insurance against identity theft. Experian Triple Advantatge offers the same service. For a little more money, Suze Orman’s FICO® Kit shows you steps you can take to improve your score. Any one of these services will be helpful if you want to monitor your score.

10. Invest in Yourself and Your Career

The biggest factor in how financially successful you will be is not how good your portfolio returns are. The biggest factor is your career and how much you make (assuming you save and invest as well). In fact, if you are spending too much time reading about ‘investments, debating over actively managed versus index funds and these stuff”, then you are probably not spending enough time on yourself. By that I mean investing in self improvement, investing time in networking with industry peers etc - things that will help you move up the ladder and make more money!.

OK - that’s my advice for now. And this is what I would have done if I could just turn back the clock.

This is the second post I am making in the “Turn Back the Clock” series. As I reflect on my younger days, getting a second hand car was probably the best financial decision I have made.

We have all heard that cars are the worst investment you can ever make. Countless Financial Gurus like Suze Orman and even Peter Lynch in one of his books mentioned how getting a second hand car makes much more financial sense compared to getting a first car.

When I first graduated and got my first job, it seems that most of my classmates quickly got their first “brand new car”. They quickly saved for the downpayment and because they had pretty decent jobs, the swanky new car was one of the first big ticket item purchase that they made.

I actually resisted that temptation because my granddad always told him that properties are one of the best investments you can make and that I should be making that my priority. So while I did not have the latest wheels and gadgets, I just got a crusty old Toyota Corolla (BTW - I still have a Toyota Corolla today), which is perhaps one of the best second hand cars you can ever get. It never gave me any problems and it just went on and on without breaking down!.

One of the tricks that I did to get the best deal was to actually get a friend of mine who was familiar with cars (because his father used to sell second hand cars and because he was kind of a mechanic). He did the negotiations for me! (was very bad at that). He managed to get the seller to let us inspect the car and then managed to negotiate a well good price for me. He got a nice big meal as a thank you!

Over the next year after I got the car, all I had to change was the brakes. Everything else worked out fine for a long time because my friend had the car inspected. I think I probably paid about $1,500 to $2,000 (in cash) for the good old Toyota. In contrast, most of my friends paid that amount for a downpayment and continued to pay about $200 a month for their lease or loan payments. I sure saved a lot of money back in those days. One thing that I did not mention earlier is that I waited until one year into my first job before getting the new car (needed to save some money). If I were to do it all over again, I would still get a second hand car as my first car. This is what I did and would do to make sure I got the best deal.

1. Get someone (preferably someone who used to sell second hand cars) to negotiate for you. Buying a second hand car is very tricky because price variation could very imply quality variations.

2. Ask the seller to allow you to get an inspection. Get to know the mechanic well before you bring the car to him. The inspection required to pass the test for a second hand car sale is not very stringent. I had friends who had to spend $800 on suspension alone not long after they had bought their second hand car.

4. If I had my way now, I would apply for the Citi® Driver’s Edge® Platinum Select® Card or the Citi® Driver’s Edge® Card for College Students, earn rebates and use them to reduce the amount I pay on my car!

My first mutual funds were purchased back in 1995. I had just started work a year earlier and was pretty tuned in to my “personal finance”. My first funds were Stein Roe Opportunity Fund (acquired by Columbus Management), AIM Constellation Fund and American Century Ultra Growth Fund.

Looking back, I took months to research what funds to buy. I went over Morningstar a gazillion times, going over past performance. Back then, these funds had some of the best 10 year performances. I could only dream what they would be worth 10 years later with such “stellar performances”.

Well guess what? Ten Years is up and sadly speaking, these funds gave me an average return of 5-6% (nominal return) over the last 10 years. To say that I was disappointed was an understatement. Historically, stocks have given holders a 6% real return. With inflation at about 2-3%, we should expect norminal return to be about 8%-9%. 5%-6% falls short of that.

What did I do with these funds? Well, I have sold them. But looking back, I have learnt a few things as choosing funds and investment philosophy.

1. Past performance is certainly not an indicator of future performance.

2. You should never bother about the index.

Why do I say that? It is because during the bear market in the earlier 2000s, I did not care about the fund outperforming the S&P. A negative return is a negative return. What disappointed me was finding out that there were actually funds that had positives returns during the bear market.

Proponents of indexing do not address the underlying flaw of indexing, which is the index could be overvalued at set for a dramatic fall as witnessed during the late 90s and early 2000s. Which leads me to my next lesson?

3. The investment discipline of a fund manager is so important.

When I went through the fund prospectus of each of the funds that I held, I realize that each one was set up and invested just to “beat the market”. The fund managers chose stocks that they believe would “outperform” because of “earning momentum” or because they looked “relatively cheap compared to the sector”. Yet when I looked at funds that really did well during the bear market, they had one thing in common. That one common thing was they only bought stocks that were deemed to be “undervalued by the market”. Buying stocks that a discount to where they think intrinsic value is minimizes the risk of a “permanent loss of capital”. After the tech bubble, many investors and fund managers suffered a permanent loss of capital. The best example is to compare an investment in Coke and a busted tech stock. If you had invested in Coke over the last few years, it really has not done much. It was priced at a 40 PE back in the mid and late 90s. Buying this “great company” at expensive prices would not have been wise. But at least, you do not lose your capital. You lose opportunity cost. In contrast, had you bought any internet stock with no earnings in the late 90s, you would have suffered a “permanent loss” in your capital. Unlike Coke, it is gone!

These are the few takaways I have from Lessons from Past. I will soon be discussing how I chose my new mutual fund. Stay tuned.

With so many Americans deep in credit card debt, I was fortunately enough not to fall into the trap of spending beyond your means. Part of the reason was my upbringing. My parents always told me not to buy something if I cannot afford it. Looking back, I cringed that how I saved when I was much younger. So I have decided to write a series on my frugal ways (and not so frugal ways) when I was much younger in college. I shall call this series the “Turn Back the Clock” series.

Today, I start with my recollection of the days when I went backpacking. When I was in college, I saved enough from my summer jobs and together with Mrs Credit Card (she had graduated and started work), we took a couple of budget backpacking trips together. Our first trip was to New Zealand and Australia and the second one to Europe (Italy for the most parts).

Given that we had a strict budget, we had to plan everything in detail. We knew how much we could spend for meals a day, our budget for youth hostels and sight seeing. If we had to rent a car, we had to take the cheapest one, period. We also had to plan in advance where we were going to stay.

We used travellers checks rather than cash or credit cards (though occasionally we had to use our credit cards). We also learned to guard our belongings very carefully. We locked our backbacks before we went to bed and locked them to our beds. We carried our travellers checks in a small “travellers checks pouch” that we hung around our necks tucked underneath our shirts.

Being on a tight budget also meant some sacrifices in terms of the quality of the place we stayed. I remembered when we were in Sydney, all the youth hostels was at King’s Cross, the red light district. We stayed for two nights and got the cheapest room. When we got to the room, we found one double decker bed and a room full of cockroaches on the wall! We had to room the bed to the middle of the room. But since we were on a budget, we lived with it. We got up as early as we could and came back as late as we could. For some reason, the roaches did not come to our bed, they only hung around on the wall!

Another interesting phenomenom when we were backing was how many ideas other backpackers had up their sleeves. I remembered discussing how to get very low fares if you volunteered to be the person to look after the overnight mails on DHL or UPS! How to get free food at various restaurants!

In fact, looking back, those trips were an eye opener in terms of how to budget and the sacrifices you have to make when you have monetary constraints. As a matter of fact, since those days, we have not been as diligent as we ought to be. But those were good memories.

One of the reasons why I think we managed to get our act together during those backpacking trips was simply because we had no choice. We had a strict budget. We simply could not afford to overspend and be caught with no money overseas!. Back then, credit card use was not really prevalent. We also wanted to avoid any international transaction fees.

One of the key lessons from these experiences was that if you were set to committing to spend only a percentage of your income and save the rest, it can be done. I think the reason why most people get into debt is because credit is so easy! Just charge to your credit card. If you have a problem with overspending, perhaps keeping your card at home is the best solution. Write checks and carry cash.

Another reason that we did not mind travelling on such a tight budget (and kept ourselves sane) was we were enjoying ourselves. We were in love and enjoying each others company (we still are in love and enjoying each others’ company!), so living in budget youth hostels and eating cheap meals did not bother us one single bit. Every once in a while, we also gave ourselves a treat, a little nice gelato.

So here is my two cents worth with regards to saving and not getting into debt.

1. You have to enforce a budget and live by it.

2. You have to enjoy life. - If life is miserable simply because you do not have the 50 inch plasma which your fellow neighbor has, then you are in big trouble. That is because you will always be tempted to spend on things you want but cannot afford.

3. Be around people like yourself. - Because we hung out with people who were also backpacking, people who were also on a budget, we were never caught in a situation where we had to overspend. If you are always hanging out with friends who spend freely (either because they have more money or that they like to eat out often etc), then you will find it much harder to stick to your budget.

With that, I shall end my first “Turn Back the Clock” series on money lessons I learnt when I was younger.