Graduating from college is truly one of life’s milestones. It is just unfortunate that so many young adults take this big step into adulthood without a financial plan. All too often, young grads are caught up in their career path and anticipated new earning power. Typically, instead of figuring out a strategy for the future, they are considering how to spend those first few paychecks. Of course, they should be able to splurge a bit on a few indulgences; after all, they worked hard for their money and deserve a little bit of fun spending. However, this reward syndrome can easily get way out of control.
Learning how to manage their finances is something that young adults must put into practice. It will set them up for a more stable financial future and in these uncertain times that is essential. Considering that so many college grads begin the new chapter of their lives in debt is another reason that developing “financial smarts” is a necessity. A January 2013 report from Forbes.com revealed that the average graduate’s student loan debt was $27,253. That reflects a 58% increase from 2005, when it was $17,233. In light of the saying, “people don’t plan to fail – they fail to plan,” here are some budgeting tips for those new sheepskin recipients:
Establish a Budget
Review your entire situation and your goals for the future. That is, record your salary after taxes and deduct all of your fixed and unfixed expenses, such as rent, insurance, car payments, loan payments, gym memberships, and utilities. Don’t forget to include estimates for groceries, transportation, clothing, entertainment, charitable, and church donations. Finally, after you have an idea of what is left over, if you don’t already have one, open a savings account and start a retirement fund. Do not despair if you can only put a few dollars in each-something is always better than nothing and your salary stands to increase over the years. If you need help getting started, there are several excellent online sites such as budgettracker.com and budgetsimple.com. Just look around for one that appeals to you.
College grads receive a barrage of “Pre-Approved” unsolicited credit cards in the mail. Don’t let this bombardment of free credit flatter you; relying on credit will put you in dire financial straits in no time. Especially avoid store credit cards. Never fall for the line, “Well, did you know you could save 20% on your total purchase today if you sign up for our store’s credit card?” The fine print on these plans usually uncovers a laundry list of stipulations and steep fees for not paying off the monthly balance in full. You’ve been warned – it’s just not worth it.
Purchase with Care
Before plunking down $125 for that cute purse or snazzy jacket, reflect on how many hours you’d have to put in at work to earn that money. Perhaps it’s not really worth all that, hm? Look for sales and don’t turn your nose up at buying items second hand. Whatever it is, never buy it unless you absolutely love it.
Learn to Cook
A 2012 article in the “Christian Science Monitor” noted the following:
“The average American spends $232 per month eating meals prepared outside the home. With 18.2 meals eaten outside the home in an average month, these meals outside the home costs a person $12.75.”
For many young adults, this figure may be even higher.
Planning menus, buying groceries, preparing your own meals, and brown bagging it for lunch can save the average American close to $3,000 a year! Bet you can think of better ways to spend three grand rather than on soggy fries and a greasy burger!
Learning to cook for yourself has never been easier, thanks to the popularity of TV cooking shows and instructional videos online. The library is another excellent resource and has so many helpful choices for beginning cooks to choose from, such as “The Cook’s Illustrated” series and the “5 Ingredients or Less” cookbooks.
Here are some easy, cheap, and healthy meal options courtesy of Eco-Vegan Gal:
Save on Entertainment
The cost of an average date night looks like this:
$20 – 2 movie tickets
$40 to $80 – dinner for 2-hope no one wants popcorn and a drink, because that will tack on another $20!
Learn to make savvy entertainment choices that will help you stay on your budget. Consider free activities, matinees, and discount coupons. How about a walk on the beach, DVD from the library, and a picnic in the park or home cooked meal? Aren’t the “best things in life” free anyway?
Perhaps the most important thing for new college graduates to realize is that their former academic advisers will not be replaced by a team of consultants ready to lead them into life in the “real world.” Getting on the road to financial freedom is 100% up to them!