As Jay-Z says, “Forever Young, I Wanna Be Forever Young!” Actually, it was Phil Collins singing that part, but it was on Jay-Z’s track, so that works. As the great days of college will soon come to an end, you will all sit back, relax, and smile while thinking about the good times and the unforgettable moments. As you sit on your porch watching friends play corn-hole while listening to good music, it hits you: “Six months after college ends, I have to start paying back my Stafford Student Loans! The job market’s horrible, our economy is bruised and one out of every ten Americans are unemployed.” Okay, that will probably not cross your mind, but it might.
As life’s realities set in and you become aware of the fact that you won’t be forever young, a sobering panic may hit your stomach. I’m here to tell you to turn up the music and enjoy the day, because life’s short, especially college! None of us should fear tomorrow, we should only try to prepare for life’s unexpected journeys, today. Whether you financially support yourself through college or your parents pay for your education, everyone has one thing in common. After college, you’re on your own! When you get your first job and receive that first paycheck, the instinct of work hard, play hard will probably kick in. For some people it’s buying a new big screen TV, celebrating with friends all weekend, or maybe buying yourself a nice steak dinner, because you deserve it, right?
Well, before you spend the entire paycheck, let’s take a minute to touch on a few key Financial Tips for College Graduates:
Pay Yourself First
You need to start saving early and often, make saving a priority. Think of it as a mandatory thing like paying taxes. Save before you even know the money is in your account. You’ll most likely have your paychecks electronically deposited directly into your checking account. Since we all do online banking, saving can be simple. On the day you receive each paycheck, make a scheduled automatic deposit from your checking account into your savings account for an amount equal to around 15% of the paycheck. Over time, this savings account will become something we call an Emergency Fund.Emergency Fund
In case of an emergency situation, you should keep between three and six months worth of living expenses inside of a liquid account, like a savings account. Life happens. People lose their job every day. If you don’t have an emergency fund, financially preparing you for an unexpected event, you will be forced to borrow money to help get you through life’s unanticipated bumps. This borrowing will typically come in the form of credit card debt. Credit card debt can create a black-hole of never-ending payments, due to the buildup caused by compounding interest. If you pay the “minimum” payment required by most credit card companies, it can take you up to 40 years to payback your debt. This is assuming no additional purchases!Avoid Credit Card Debt
Try to avoid credit card debt at all costs. Keep it simple, spend less than you make. Credit card companies will charge you unfair interest rates that you’ll have no control over. Don’t be forced to use credit cards for emergency situations, and pay them off in full each month.A Budget
It’s funny when I hear some financial planners talk about creating a budget. It’s cut back here, don’t spend there, thank you and please come again. There are two real ways to create a LASTING budget; change your lifestyle and spending priorities or force yourself to save first. If you put money aside for your short-term and long-term goals and make the required monthly payments on debt like student loans, then you can feel comfortable spending what is left. This will force you to adjust to a lifestyle within your paycheck. When you save first, you will quickly realize what lifestyle you can truly afford.So, save a portion of each paycheck, create an emergency fund, avoid credit card debt, and be willing to adapt your lifestyle around your income. Don’t try to keep up with the Jones’, because the Jones’ are in debt. I wish I could have talked more about the importance of saving for retirement, but GRAD is giving me the gotta-go sign. “So when the director yells cut, I’ll be fine…I’m forever young.”