For those who don’t need to tap their savings yet, however, ultra-low interest rates have some hidden advantages. For example:

You can pay your bills early. I used to hoard the money I needed to pay big annual or semi-annual bills, such as property taxes and life insurance. I’d send in the payments at the last possible moment to squeeze as much interest from our savings as possible. Now, I don’t bother. As soon as I get the bills, I set up the electronic payments and hit the send button. Life’s a lot simpler this way.

You save time. Back when the average savings account paid less than 1%, while online banks paid 5% or more, it was worth doing a little research to find a great rate and to move your money around once in awhile. Now that the gap has narrowed so dramatically—the best online accounts pay about 1%, while the average savings account rate is around .25%–it’s hardly worth the bother unless you’ve got a substantial cash stash.

It’s easier to avoid fees. If you have some cash savings, you can avoid a lot of the silly fees your bank wants to levy—without having to worry about the opportunity cost of keeping your money in a non- or low-interest-paying account. If you have to park $2,500 in your accounts to avoid fees, it’s likely smart to do so, since you’d earn only about $2 a month on the money in a higher-rate online bank account. If you’re required to keep a five-figure balance to avoid fees, though, it may be worth finding a new bank.

There’s no reason to take a chance with money markets. If you still have cash in a money market mutual fund, check the rate you’re getting. It’s probably less than a quarter of a percentage point, and may be as little as a tenth of a point. Remember that money market funds aren’t FDIC insured, so you do have a risk of losing principal, however small. Here’s one of the rare instances where you get a better deal with a safer product—you’ll get a higher yield investing in CDs or an online bank.
It’s clearer that there are no truly “safe” investments. Back when rates were higher, it was tempting to just park money in higher-yield bank accounts rather than risk it in the stock market. The problem with that approach is that your money had no chance of beating inflation over time—your purchasing power was being eroded by inflation and taxes. Today, it’s pretty obvious that you aren’t going to beat or even keep up with inflation if you put all your money in “safe” investments. You need to take at least some risk to get the long-term growth you’ll need to beat rising costs.

Answer: If you don’t have a down payment saved, you aren’t ready to be homeowners.

Homeownership is expensive, with lots of unexpected costs constantly popping up. Some are relatively minor, like having to replace a worn-out appliance, while others are major, such as having to replace a furnace or a roof.

That’s why homeownership isn’t a good idea for people who aren’t already in the habit of living below their means and saving a decent proportion of their incomes.

Take the next year or so to tweak your spending and save up a down payment. You’ll need at least a 3.5% down payment to qualify for an FHA loan. A bigger down payment will give you more loan options and won’t leave you upside down on your home from the first day. A 20% down payment is often best, since you can avoid private mortgage insurance.

A year also will give you time to polish those credit scores from “OK” to “good.” The higher your scores, the better the interest rate you’ll receive.

But the fact that you’re receiving a “bad report” from your bank is worrisome. You don’t specify what happened, but anything that could be reported to the credit bureaus, such as a missed credit card payment, could cause major damage to your scores. Simply switching to another institution won’t prevent that. And if you’ve piled up a bunch of bounced checks, your credit reports may not be damaged but you could find it difficult to open new accounts at other financial institutions.

Whatever happened, you should try to straighten it out with the bank before you decamp, even if you ultimately decide to switch accounts.

We in the media need to make that clear. We’ve been excoriating Congressional bungling and inaction so loudly that many ordinary people are getting the impression the world is about to end.

It’s not. A default would have some seriously bad affects—including raising the interest rates on the national debt that everyone professes to care so much about. One of the basics of money management is that if you’re in debt, you want to keep your interest rates as low as possible to get out of debt faster. Doing something that makes your interest rates rise is just stupid. But right now, “stupid” is Congress’ middle name.

So what can you do with your own money to prepare in case we do default? My thoughts:

Move your cash from money markets to FDIC-insured bank accounts. The average interest rate on money market mutual funds is .25%, and they aren’t federally insured. The risk that money funds would “break the buck” and lose principle is probably minimal, but you’re not being compensated for taking any risk, so you’d be better off in an online bank account paying 1% or so.

Don’t invest in gold. Gold is a hugely speculative investment. The gold bubble has been growing for years, and the last time this happened the crash was pretty awful. In fact, the price of gold still hasn’t climbed back to its previous 1980 peak in inflation-adjusted terms. Buying gold or gold mining shares right now is gambling, not investing.

Make sure you’re diversified. Bailing out of the stock market isn’t a good choice. Congress will get its act together eventually. If it doesn’t do so before the default, it will do so quickly afterward, once the stock market plunges. Either way, if you’re out of the market you’ll miss the relief rally. In any case, trying to time the market is all but impossible. If you’re invested in a broadly-diversified mix of stock and bond mutual funds, you should be able to hang on for the bumpy ride. (One way to get quickly diversified is to put your money into a “lifestyle” or “target date” fund, that does all the diversification and rebalancing for you. Most workplace retirement plans and brokerages offer these.) But remember that money you’ll need within five years should be in a safe, easily accessible bank account, not invested in the stock market. That’s true under any market conditions, but if you’ve been taking chances you shouldn’t, now is the time to correct that.

Answer: What you’re experiencing is frugal fatigue. You’ve cut and you’ve cut, but you still have a long way to go. It’s easy to look at the road ahead and feel discouraged.

But you have to give yourself credit for paying off $13,000 in debt. That’s a huge achievement. Give yourself another pat on the back for staying current with your bills.

The discipline you’re learning will help you enormously in the years to come. You’ll be able to build a substantial emergency fund once the debt is paid off simply by redirecting a portion of the money you’re now sending to creditors.

In the meantime, don’t sweat the fact that you don’t have a huge savings account. Work on setting aside just $500 or so, which should cover most small setbacks and keep you from having to use your credit cards. If you have to drain your savings for an emergency, that’s OK — the fund is serving its purpose. Just build it back up again.

Earning more money is usually the fastest way to dig yourself out of a hole. If you can’t find another job or a better job, create your own job. Perhaps your work skills lend themselves to moonlighting. If your job allows you to take on freelance clients, that’s a good way to bring in extra money. Otherwise, if you have a talent or skill you can teach, do that. If you don’t, consider providing services that others need: house cleaning, house sitting, dog walking, errand running.

You can look for some ways to give yourself more breathing room. If you’ve cut all the small expenses, then it’s time to look at the big ones: your rent and your debt payment. You may be able to free up more money for saving, and for living, if you find a roommate. Also, ask your credit counseling agency about the possibility of reducing your payments a bit. It will take longer to pay off your debt but it could make life more pleasant in the meantime.

Answer: It’s smart to put at least a few hundred dollars in the bank before you begin to pay down your debts. That way, if you face a small financial setback, you can tap your emergency fund and not have to add to your debt. But it doesn’t make sense to wait until you have several months’ worth of expenses saved before you pay debt, because that can take years to accomplish and you’d pay a fortune in interest in the meantime.

Answer: Predicting future inflation is pretty tough and depends on a number of factors. Right now, for example, many used-car models are fetching significantly higher prices than in the past because of the sharp decline in sales of new models during the recession (leading to fewer available used cars now) and the fact that many owners are hanging on to their cars longer to save money. The production slowdown in Japan after its recent disasters is also affecting used-car prices.

Since predicting inflation is tough, you’d be smarter to focus on the factors you can more easily control: your savings and the condition of your current car. With proper maintenance, today’s vehicles can notch well over 200,000 miles. Owning a car for 10 years or more gives you plenty of time to save up cash to buy your next vehicle.

This year’s college graduates face a particularly daunting array of financial challenges: Hefty student loan debt. A tough job market. Complicated financial options, from Roth IRAs to consolidating student loans.

It’s overwhelming, but not insurmountable. These seven mistakes and their solutions, adapted from my book Generation Earn: The Young Professional’s Guide to Spending, Investing, and Giving Back (generationearn.com), are designed to help college grads bypass common hiccups and take control of their financial lives.

1. Taking on too much debt – or not enough. Too much debt can weigh down recent grads, forcing them to spend more money on interest and fees than on fun and other goals. The new credit card regulations make it harder for anyone under the age of 21 without their own income to take out cards of their own, which could make post-graduation overspending even more tempting and as intoxicating as frat parties are to college freshmen.

At the same time, the recent recession has led many young people take the debt-is-bad message too literally. Avoiding loans altogether, however, can hurt college grads. Sometimes, student loans for graduate school or a mortgage are good investments. Being responsible for credit accounts also allows 20-somethings to build their credit history, which is required if one day they want to take out a mortgage, auto loan, or other type of loan.

The solution: Build your credit history slowly and steadily, by opening up accounts in your own name and then paying them off on time.

2. Becoming victim to rapid lifestyle inflation. You’re a recent college grad, so that means you probably need a new car, new apartment, new sofa, and a new… Wait a minute. Not only do you not need all those things, but you probably won’t appreciate them much, either. A little theory called the “hedonic treadmill” explains why. We adapt all too quickly to improvements in our lifestyle. That 60-inch television that you drooled over at Best Buy will soon start blending in with the rest of your furniture, along with your top-of-the-line coffee maker and pillow-top mattress.

The solution: Instead of using your first paycheck to make your new digs look like a sitcom set, spread out your purchases over time. Maybe you need a bed right away, but that embroidered duvet cover from Pottery Barn can wait.

3. Falling into bad money habits. Bi-weekly $20 happy hours, daily $15 lunches, and nightly take-out are just a few of the bad habits that eat into new grads’ bank accounts. While the occasional lapse isn’t a problem, repeatedly wasting money on a weekly basis for years will cost you big-time.

The solution: Learn to cook, by enlisting the help of friends, family members, or your favorite celebrity chef (via the Food Network). The habit can save you hundreds, if not thousands, of dollars a year, and turn your home into a popular destination for friends. It’s a skill that lasts a lifetime.

4. Waiting to save and invest. Sure, you don’t feel like you have an “extra” money yet, and you’re still getting used to seeing your name on a paycheck. But that makes it the perfect time to start saving at least one-quarter of your income [link] for your future goals, including retirement. The first priority is to establish an emergency savings account with at least three months of expenses that can get you through any unexpected bumps, from unemployment to a car accident. Then, start saving for retirement. If your employer offers any type of 401(k) matching program, take advantage of it – passing it up is like saying no to a pay increase. Then, open an after-tax savings account for your other goals, from traveling to homeownership.

The solution: If saving any money seems daunting, then start by funneling a modest 2 percent of your income into a high-yield saving account or money market fund. Then, slowly raise that percentage. Once you have your three-month emergency fund stored away, then consider investing a portion of your longer-term savings in low-fee index funds and other more aggressive investment vehicles.

5.  Failing to negotiate for a higher salary. Even in this economy, employers expect some haggling over salary and benefits. In fact, doing so is a sign of professionalism shows that you, a recent college grad, understand how the working world works. A simple request after expressing enthusiasm and appreciation for the job offer can eventually lead to hundreds of thousands of dollars more in lifetime earnings. (Linda Babcock of Carnegie Mellon University calculates that not negotiating your first job offer can result in a loss of up to $1.5 million in lifetime earnings.)

The solution: Practice your job offer conversation in advance of receiving any potential offers so you’re ready to land a better deal and research your field ahead of time so you know what to expect. If the salary really is fixed, then consider focusing on other benefits, which can be worth as much as a third of the salary but job seekers often overlook. What are the health care benefits? Retirement account perks? Vacation days? Work-at-home flexibility? Decide what’s important to you and get ready for some professional haggling; it usually just takes one round of back-and-forth.

6. Thinking you’re done studying. Sure, you have your degree, but unless you attended one of the few schools that teach personal finance, you probably know relatively little about how to build wealth. That makes the post-graduation period the ideal time to take matters into your own hands.

The solution: Look for ways to learn more about smart personal finance strategies, and it doesn’t have to be boring. Dozens of blogs, websites, and books make learning about money fun, and many local community colleges and universities offer personal finance courses for local professionals. You might also want to consider forming a money club with friends, where you meet up once a month to talk about your money questions, goals, and research.

7) Getting buried in paperwork. There’s no avoiding the fact that being an adult comes with some secretarial duties. Suddenly, you have pay stubs, health insurance forms, tax documents, and credit card statements to keep organized. It’s easy to let them build up until you just want to shred the pile and toss it in the trash.

The solution: Take advantage of modern technology by going paperless whenever possible. Online accounts are easier to manage (and, bonus, better for the environment). New websites such as shoeboxed.com keep your receipts organized online, which is especially helpful at tax time. Mint.com makes it easy to track your spending and establish a budget.

The bottom line: Add “getting on top of your finances” to the list of things to do after graduation day – and try to make it as fun at least as fun as cleaning out your dorm room.

Answer: Use your grandfather’s generous gift to both help you retire most of your debt and get a start on an emergency fund.

After you sell the car, take $500 to $1,000 of the proceeds for your emergency fund. That will cover most minor emergencies and should keep you from adding to your credit card debt. Put the money in a safe account that’s accessible but not too accessible. If it’s too easy to tap, you might be tempted to raid it for non-emergencies. A savings account at an online bank or a credit union are two good choices.

Take what’s left and pay down your credit card bills. Stop using your cards and figure out how much you need to put toward your debt to get the rest of it paid off in a few months. Then trim your expenses to come up with the money and set up an automatic transfer from your checking account to your cards.

Despite what you may have heard, credit card debt isn’t normal — a majority of U.S. households don’t carry credit card balances, according to Federal Reserve statistics — and it’s a real cancer on your finances. While you’re young, you should get out of the habit of carrying balances and into the habit of paying your cards in full every month. You’ll be richer for it, and less likely to find yourself in the sad position of being old and in debt. Read on:

Answer: You should put retirement saving first now, even before you pay off your debt. If you don’t get a relatively early start putting away money for retirement you’re unlikely to be able to catch up later. Those who start saving after age 35 have a very tough time putting away enough money to comfortably retire, says Roger Ibbotson, founder of Ibbotson Associates financial research firm and a Yale School of Management professor. The ideal time to start saving for retirement is with your first job.

Prioritizing retirement means you’ll have less money for other goals, so paying down your debt and building up an emergency fund will take longer, but so be it. The amount of extra interest you pay on your debt will be overshadowed by the tax breaks and investment gains you’ll make in the long run in your retirement accounts.

After paying off your credit card debt, your next goals will depend on your individual situation. If all your education debt is federal student loans rather than private loans, then you needn’t be in a rush to pay it off. That’s because federal student loans have relatively low, fixed rates and many flexible repayment options. You also may qualify for student loan forgiveness in 10 years if you work in public service or 25 years if you don’t. An income-based repayment plan would allow you to minimize your payments so you could put money toward other goals. You can research your repayment options at FinAid.org, a financial aid and student loan education site.

If, on the other hand, you have some private student loans, you’ll probably want to make paying that off a priority since the rates are variable and you don’t have as many repayment options. (You probably wouldn’t be able to make income-based payments, for example.)

When to prioritize a home purchase depends, again, on your individual situation. If you’re sure you’re where you want to be for the next 10 years or so and are eager to own a home, you could start a down payment fund as soon as you finish paying off the credit card debt.

By sheer coincidence, we’d already scheduled a replacement for our AC and furnace that’s taking place right now.

I’m writing this not just to express amazement at our incredible luck—our contractor laughed when I told him, saying “you got every last dime out of your old system, didn’t you!”—but to talk about the importance of having some green saved up to handle the inevitable big repairs that come with owning a home.

Because if it’s not the air conditioning or the heating, it’s the roof—or the sewer line, or the pipes, or the electrical system. Something big will inevitably go wrong during the time you own your house, and often it’s several Big Somethings right in a row.

For around $400, a qualified home inspector can scrutinize your casa and give you an idea of what repairs are in your future. The inspector may help you estimate the costs, or you can get a membership to Angie’s List (which is where we found our contractor, by the way) to see what others paid for similar repairs.

Or you can simply start plugging money into a targeted savings account for your home. Eric Tyson, author of “Personal Finance for Dummies,” recommends setting aside 1% of the value of your home each year for this stuff. In most years, you won’t spend that much, he says—but inevitably a year will come along when you need every dime.