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Ask the Readers: Advice for College Grads? Print
Monday, 28th April 2008 (by J.D.)This article is about Ask the Readers, Basics, Planning
Tomorrow I’ll be giving a short presentation about personal finance to a group of seniors at Western Oregon University. I’ll begin by providing a brief version of my own post-college financial failures, but I want to spend most of the talk providing two or three great take-aways that these young adults can put to use as they enter the “real world”.
I’ve considered discussing the dangers of lifestyle inflation and the value of goals, but maybe these are too abstract. Ramit suggested I provide a handful of actionable ways to maintain sound personal finances. (Opening a high-yield account, asking for fees to be waived, saving for a goal, etc.)
If you’re in college, what sort of personal finance information do you wish you had right now? What are you curious about? What are the things you want to know how to do (or how to avoid) once you’re out of school?
If, like me, you left school long ago, what do you wish you had known about money? What knowledge would have helped you when you were starting out in life? If you could give your younger self just two or three pieces of financial advice, what would they be?
April 28th, 2008 at 5:14 am
I think what needs to be focused on is climbing out of debt…knowing what to pay first. If a graduate has loans and credit card debt what do they need to pay off first. With this goes with the idea of needs vs. wants (as you mentioned “lifestyle infalation”). It is important to understand that many students are starting from stratch. Chances are they will be in 5 figure debt and needing a place to live and/or a car for transportation. How do they juggle these financial needs while cutting down on their debt and still maxing out their 401k/savings…This is a lecture I would have loved to hear when graduating a few years ago.
April 28th, 2008 at 5:30 am
I don’t think you can hammer on the point of compound interest enough. Saving $1 at 24 is like saving $50. Saving $1 at 34 is like saving $20. Saving $1 at 55 is like saving $1. Not those exact numbers, but you get the idea.
Also- I think discussing and agreeing upon finances with a future spouse is essential. That you can learn to agree on a spending and saving style.
GL with your presentation!
April 28th, 2008 at 5:32 am
I wish I would have known how destructive living without a budget was. 3 years without a budget led to 25 grand in debt. It isn’t about how much money you make, it’s about how must of it you spend.
April 28th, 2008 at 5:32 am
I think the most important information I missed (forgot to calculate) when a senior in University, is just how much time should be dedicated to the study of personal finance. It wasn’t until I was 32 that I realized that I spent more time agonizing over the specifications for my new television than I did managing a portfolio worth 100x the sticker price.
I was fooled by the financial industry that “advisors” actually advised, and assumed that I was being fiscally responsible simply cutting cheques to ABC institution.
Study doesn’t stop after graduation. The importance in continuing education only gets greater.
April 28th, 2008 at 5:37 am
It would be great if you can post a transcript of your talk. I’m a senior about to graduate and would love to hear what you told some fellow students.
Thanks
April 28th, 2008 at 5:39 am
I wish I would have given back the ‘refund’ I got from my student loans when tuition and room and board were taken care of. Instead I used it for living expenses, which I could have paid for by getting a job, working harder in the summers, etc.
April 28th, 2008 at 5:41 am
One of my college professors my freshman year gave a lecture about “5 year plan.” The only things I remember from his lecture are start a Roth IRA and contribute the max to it and don’t buy a car until you can pay cash for it. I did both of those things and now I am financially way ahead of all my peers 10 years later.
The compound interest thing is definitely a biggie as well as the quote “Live like no one else now so you can live like no one else later” from Dave Ramsey. Basically don’t try to impress your friends and you will be way ahead later in life.
April 28th, 2008 at 5:42 am
Learn about your future spouse’s attitudes toward personal finance BEFORE you marry. If you’re a woman, find out what his attitude toward women vis-a-vis money is (this may differ from his overall attitude about women).
Have a prenuptial agreement; keep inheritances and savings you gathered before you married sole and separate; if he’s wealthy enough to support you without your having to work, do not let your job skills atrophy. Keep working at something marketable, even if it’s part-time or on a volunteer basis.
April 28th, 2008 at 5:51 am
1) The importance of saving for retirement while young.
2) The danger of credit cards (though as college seniors it may very well be too late to teach them that lesson).
April 28th, 2008 at 5:55 am
I wish that when I graduated from college, I had a better appreciation for:
-The long-term benefits for living beneath my means.
-That, contrary to what I thought when graduating, I really would want to retire early.
-The benefits of home ownership, when you can afford it. (This might be particularly important to to emphasize given the media’s obsession with the currently goofy housing market.)
-Benefits of 401k, Roth IRA, and similar plans.
April 28th, 2008 at 5:56 am
I wish people had hammered home to live within my means. If I can’t afford to pay cash for it, I probably don’t need it. My hubby and I lived well beyond our means for the three years he was in grad school, and it lead to a lot of debt we’re still dealing with.
April 28th, 2008 at 5:59 am
I just graduated, and here’s what I wish someone would tell me:
1. How do you establish your first budget and figure out what “in your means” actually means, when you don’t have a clue how much to budget for rent, utilities, groceries, etc.?
2. How do you make the transition from school to work more streamlined? (This is very much on my mind, since I start a new job in about an hour.)
Thanks,
Julie
April 28th, 2008 at 6:01 am
Compound interest, compound interest, compound interest.
Continue to live like a college student during the first post-college ‘professional’ job, and stick the rest of your income into a 401K, 403b, or Roth. Start with 20% of your income, and move up from there.
Resist the urge to lease a nice, shiny car and rent a rocking apartment after graduating. There’s time enough for that stuff later, when you’ve solidified your retirement and investment funds.
Finally, PAY OFF DEBT. And don’t use the credit cards.
April 28th, 2008 at 6:10 am
My advice would be to try to live like a college student for a few more years. When I was in school, I lived in a tiny dorm room…that I shared with someone else. At the time, that was good enough for me.
After school, I eventually moved to an apartment, then a bigger, nicer apartment, then a house, then a bigger, nicer house, etc. It’s definitely easier to move up in spending than it is to move down once you’ve ramped it up, so my advice would be to maintain a “student” lifestyle for as long as possible.
April 28th, 2008 at 6:21 am
Spend the student loan money only college fees, not junk. Make a budget instead of spending like you have just won the lottery.
Find a major that you can get a job with the day you leave college. Psychology and Art History are interesting, but they don’t pay the bills. You’ll be working at McDonald’s when you’re out of college. Look at technical degrees such as engineering, nursing, or chemistry that will allow you to earn a great living and build wealth.
Work hard to pay off the student loans early because you can expect to have to pay on your spouse’s loans once you find the right guy/girl.
April 28th, 2008 at 6:26 am
What are the financial implications of going straight to grad school full time after college versus getting a job and doing grad school later & part time?
April 28th, 2008 at 6:29 am
There are three mistakes I made coming out of college, two of which I made.
1) Start an emergency fund. If you don’t have at least two months saved you are in bad shape. I couldn’t move out of my apartment to a different one because I didn’t have first month’s rent, last month’s rent, and security deposit.
2) Don’t take out a loan to buy anything. I was amazed at how foolish my friends were to take out car loans and even furniture loans as soon as they graduated. Not long after that, I bought a computer on a credit card and had a really hard time paying it off.
3) Don’t assume you will make more money in the future. After college, I immediately went to graduate school. I slowly built up credit card debt during graduate school (about $3,000 in the end) thinking that I would pay it off at the first paycheck of my real job. Then, I decided to take a low paying job that I really enjoy after graduate school. My debt wasn’t too large, and I still managed to pay it off in six months, but I shouldn’t have made assumptions about my future income.
April 28th, 2008 at 6:30 am
I’m working on a post for this exact thing right now! It’s going live this afternoon if you want to check it out. (I just helped with a college presentation yesterday)
April 28th, 2008 at 6:35 am
I agree that a good emphasis on getting out or staying out of debt is important. Put a little scare into them. Additionally, it’s important to save as much as I could in the company’s 401k program. One of the best bits of advice I got as I started my first job was to put as much as I could into the 401k, if that wasn’t the maximum allowed, then each time I got a raise I should increase it as much as possible. Increase my savings as my income went up, not my lifestyle/expenses.
April 28th, 2008 at 6:48 am
JD,
Hammer the point about lifestyle inflation. I wish someone had pointed it out to me that I was happy being a broke student! Would’ve saved me 6 months of idiocy.
I’d show how companies make money off of interest payments (car loans, credit cards) and talk about what the real prices are one pays with using such devices.
April 28th, 2008 at 6:50 am
I heard an interesting spot on NPR today about the nation’s savings rate. Though the “expert” definitely said saving was important, he emphasized that what you save now is given to your future self, who may earn more. (And your present debt is a loan from your future self). It makes it hard to save necessarily if you think of it this way. However, as an anecdote, the “expert” himself, as an economics major in college, worked very very hard and scrimped and saved. What it amounted to was a lot of hard work and not that much reward, especially since he made a lot more money later. The key message was balance. Save money but don’t kill yourself over it. What you’re looking for is not money but freedom and happiness. I think that’s often lost in the mix for college seniors. And I think when you look at personal finance that way, it’s less like you’re depriving yourself and instead, giving yourself more.
April 28th, 2008 at 6:51 am
a big question when i was gearing up for graduation (and a big question my younger sis and my cousin are grappling with now) is:
“grad school???!!!”
yes, all the question marks and exclamation points are appropriate. it’s a scary decision to stay out of the job market for 2-7 more years, even if afterward you’re looking at a better future. maybe hit on a couple points talking about the cost-benefit there.
April 28th, 2008 at 6:54 am
I’d tell new grads that the best thing they could do coming out of college, with a new job for the first time, is to set up a savings habit, and a plan, with goals. ING Direct is terrific for doing this. I have 7 savings accounts with different goals in the names of each. The vacation fund is my favorite. I love watching it fill up, and my wife and I will be going on a fantastic trip out west this summer, and it will be paid for before we set foot on the plane.
Next, I’d tell them to live “low on the hog” until they have a $500 emergency fund.
Next, I’d tell them to get basic cable instead of the digital/satellite full tilt deal, and get out and meet some people instead for fun. You’d be surprised how much money you save going to talks/lectures/free concerts instead of watching tv, and the entertainment mileage you get.
April 28th, 2008 at 6:55 am
1. Cut up the credit card and pay it off as quickly as possible. Even having one around for “emergencies” is dangerous because there will come a time when buying a pizza and a 2-liter will seem like a life or death scenario.
2. Create a budget and stick to it. This way, you know how much you have and where it’s supposed to go. Plus, you’ll never accidentally overdraft on your account.
3. Don’t keep up with the Jones’s. With the hope of looking like a baller, lots of people your age will be buying cars and clothes on credit and spendng 60% or more of their take home pay on a fancy apartment. 10 years from now, many will look at their savings, investments, and credit card balances and realize something is wrong. Save yourself 10 years: don’t put on the golden handcuffs.
April 28th, 2008 at 6:56 am
I feel a general survey of personal finance would have been helpful for me. For instance, roughly what % of my income should I be spending on housing. In addition to high yield savings accounts and compound interest, I’d show them how easy it is to start investing via index funds.
April 28th, 2008 at 6:56 am
I only have one bit of advice. No private loans. Ever! Donate sperm, plasma, work 3 jobs, do anything! Don’t take out private student loans!
April 28th, 2008 at 6:59 am
I wish someone would have given me a better idea of what it’s like to completely support yourself. I had some help from my parents with school, but the little things like paying your own health insurance, and the cost of saving for retirement are bigger than a college student can get their head around. I’d also make sure they know that they are in for a big lifestyle change - as you were talking about before. It’s a huge transition going to work after being in school for your entire life, and most of them have probably never seen paychecks like they are about to. But if they realized that 75% of the check is already allocated, it will prevent them from getting too crazy with it…
April 28th, 2008 at 7:00 am
Know what you are spending your money on and make sure it aligns with your values (and make sure you spend less than you earn). Educate yourself about personal finance, and investing (but target date funds are a simple place to start).
I think giving them a solid goal for savings rate might help–if you have something to shoot for, you are more likely to take action. Tell them the standard savings advice:
small efund/cc debt
401k to match
roth IRA
401 to max
April 28th, 2008 at 7:04 am
It may not be personal finance related, but the best piece of advice I ever received was to “do what you love and the money will come.” Too many times, new college grads are focused on how much they are gonna make instead of the love of the job.
April 28th, 2008 at 7:07 am
My best advice for those about to leave college and enter the work world would be to reject the common money myths they have heard their entire lives. No, not everyone has to have a car payment. Not everyone has to buy a house within six months of starting their careers. Credit cards are not the only way to acquire nice things. Basically, be very methodical in your financial decision making and do not rely on advice from others - follow your own gut instincts.
April 28th, 2008 at 7:09 am
Read every book in the personal finance section of the library and know that having a good life isn’t about making a lot of money, but how you live your life. Eight years ago I was swimming in debt, now everything is paid for with cash. The thing is if it’s not worth saving for, or paying cash for, it’s not worth buying on credit. (1) Learn the true value of the dollar you earn: you have to earn $2.00 before taxes (income, property, consumer) & inflation to have $1.00 to spend. Think about that. You have to EARN $100 to buy that $50 dollar sweater; EARN $500 to make that $250 credit card payment: if you bought the sweater on credit, then add in EARN 2x the interest cost. (2) Save & pay cash for Depreciating assets & goods (cars, boat/ATV, clothes, vacations, food) and Borrow for Appreciating assets (house, property) (3) Use a personal money manager like Quickbooks or MS Money to track your spending–you won’t be able to kid yourself about how much you spend & where.
April 28th, 2008 at 7:10 am
I’m 24 and graduated 2 years ago. I think the best advice I can give is to read Suze Orman’s “The Money Book for the Young, Fabulous & Broke”. I personally tell all my friends who are just starting their first jobs to read it. It’s an easy and straight forward book with solid information that will get the majority of new grads in the right direction. Buy it. Borrow it. I have a copy that I bought just to lend to my friends.
However, I think if you’re already here reading through getrichslowly.org, you already have a good foundation for all your personal finance questions.
April 28th, 2008 at 7:10 am
Open the high yield savings account, and put what you can into it. Any little bit will help.
Go to house parties or drink in with friends, rather than go to the bar. Kegs or $5 all-you-can-drink cups are a better deal than bar tabs and cover charges.
Don’t go crazy with the credit cards. And don’t sign up for every credit card offer you come across, no matter what free stuff they’re giving away.
Do get a credit card, though, but do your research. Find one with a decent rewards system, preferably cash. You DO need to start building credit.
Start a spreadsheet, and create a basic budget. Just list what your monthly expenses are (cell phone, tuition, rent, etc.), and then list your income. The key is to not spend more than you bring in, no matter what.
Don’t be afraid of student loan debt. It’s an investment, and you’ll be fine. You’ll pay it off eventually, the rates are low, and nobody has $100k or loaded parents sitting around. Student loans are normal.
April 28th, 2008 at 7:11 am
I am a college senior and I’d like to know if there are any specific books that you recommend on this subject for 20 somethings. Also, if you could make your talk into a podcast that would be fantastic!
April 28th, 2008 at 7:12 am
1. Even a little bit of money saved now will buy a lot of freedom and peace of mind later (compound interest is your friend!).
2. Consider your career plans. Is your major truly the subject that you’re most interested in, or is it a fall-back or something you’re pursuing just for the money? All of those answers are valid, but they will probably influence how long you are satisfied working in that area and how you may want to approach the next 10 years. If your specialty is not your passion, work hard and milk it for all it’s worth, save and plan so that you can make a change later, with a buffer of savings and investments. If your specialty IS your passion, you can afford to choose quality over quantity when it comes to salary, because you’re in for the long haul.
3. Minimum monthly payments are a con.
April 28th, 2008 at 7:18 am
Paying off debt, budgeting, and preparing for home ownership. Podcasts would be kool too…
April 28th, 2008 at 7:19 am
One of the things I wish I had done was to pay better attention to my school loans. They were at something like 3% when I graduated. I had 6 different loans and for awhile was being billed for them individually. I got so much mail from them, all the same, that I eventually quit opening it all — just assumed it was another bill. So (you can see where this is going) I missed the notice of an impending rate increases and the alternative “lock in your rate by consolidating” option. Now my loans are at 7.14%. Oy vey. Obviously hindsight is 20/20, but that was stupid with zeros on the end!
April 28th, 2008 at 7:20 am
Never stop learning even after your college or career life , financing & marketing will be a real challenge in life .
Happy to read many , experience & post from you guys ,
Tracy Ho
wisdomgettingloaded
April 28th, 2008 at 7:22 am
If I were my younger self and needed to give myself some advice, I would say “Don’t trust anybody when it comes to your money” and “Start saving and stacking away at least 30-40% of your money earned!”.
April 28th, 2008 at 7:26 am
Remember that your parents took 30+ years to arrive at their current lifestyle. Don’t try to emulate them within the next 10 years.
Remember that those of your friends who DO emulate them are probably up to their necks in debt, and are not to be envied.
Forget the Joneses.
Freedom doesn’t lie in having the biggest, best material goods. It lies in not having any payments.
April 28th, 2008 at 7:28 am
During school (and several years after graduation) I lived paycheck to paycheck and used credit to make ends meet. This was typical of just about everyone around me, so at the time it seemed to be an acceptable means of living. I was obviously wrong.
If I could give only three pieces of advice to new graduates it would be:
1. Start a Budget!! This is the only way to learn the difference between WANT and NEED, and how they should be prioritized.
2. Start saving!! Call it an emergency fund. Call it retirement. Call it what you want. Just start saving. Even $1 a day adds up to something.
3. Credit is NOT the answer!! Enough said.
April 28th, 2008 at 7:31 am
Hey J.D,
I just discovered this site a month back and am really loving it. I just graduated from college, got a job and looking for an apartment.As some have said, is to continue living as a college student for about a year till you are financially good enough. The additional money can help pay debt which you incurred in college. I set up an ING savings fund a few months back, which cuts some money every week automatically from my pay. Avoid buying expensive stuff such as large TVs, audio systems. Craigslist is the best place to look for such stuff for cheap. You can always get the “good things” later. It’s also good to maintain a list of stuff you bought during the day and graph it at the end. It helps you get a perspective on where your money is going. Lastly if you have time, read books and blogs like these for tips and ways to make money work for you. Thanks for the wonderful blog.
April 28th, 2008 at 7:32 am
Most important, above all else:
Learn how to do and live by a monthly written budget, and have an accountability partner to help stick to the budget. (Shameless plug) - Refer them to this blog where I made my guest post on budgeting to get started :-D.
Second most important:
Never borrow money, ever. Work extra jobs to pay off any existing debt, and to save up money to never borrow again.
Third, of worthy mention:
Never take advice from broke people.
April 28th, 2008 at 7:35 am
I’ll buck the trend…
If you can save, great! But for most college students, you have very little income. I wouldn’t worry about retirement savings, but instead try to put aside as much money as possible to get through lean times. That was the big debt I incurred in college.
Sit down with some kind of career advisor. Getting a bachelor’s in art history? Is that going to increase your earning potential? How likely are you to find a job? Most likely GRS readers will pursue a more practical vocation, but it’s worth noting.
Biggest thing would be to budget. It’s difficult to follow, but if you can at least loosely stick to one, you’ll be much better off when you graduate and the money involved is much higher.
Finally, and this is a big one, don’t try to live too big and too fast when you graduate! Sure, when you get that first real job and your income triples, it’s tempting to get a new car and buy new clothes and a big apartment, but you’ll end up without any wiggle room, a spending lifestyle that incurs lots of debt, and won’t have any money to save when you need it.
Personally, I only managed $2k in credit card debt, which isn’t bad considering some of my friends. But over the last three years, I’ve only paid it down $700, and that’s just in the last six months! That means three years of about $100 a month ($3600 for you math grads) in minimum payments and finance charges to pay $700 of debt.
Additionally, I got a great job and bought a used luxury car at $400 a month for five years. Sixty months of $400 a month! And of course, I didn’t have money set aside for repairs. So now I have a high mileage luxury car that I’m looking to get rid of after paying it down some more, and getting a more sensible ride. Again, $10k to drive a fancy car for a couple years when that could have bought a reliable vehicle.
April 28th, 2008 at 7:40 am
Don’t think that you will live the same type of life you were accustomed to while you lived with your parents. Just because you graduate doesn’t mean you will get a job that pays well immediately. And just because you get a job doesn’t mean that you will always have one. I’m two year out, and was so angry when I was layed off. because I worked so hard in school to even get that job. Luckily things change, but if you manage your money well you’ll be ok an a situation like that.
April 28th, 2008 at 7:41 am
Echo most of the above, especially re: written budget. I’ve been out about 4 years from grad school. The number one thing i wish i had know then was how to get a handle on this. This website, D. Ramsey’s podcast for motivation, etc. Do your research.
Other than the budget, i think the single most effective piece of advice is to realize you’re in college. You don’t need the fancy things as the majority of students there don’t live fabulously rich and it’s not looked down upon to “live like a college student”. There’s a reason that phrase exists!
Get roommates, and if you can, take on a few when you get your first job. Pay off all debt and continue the rest of the advice above. Plus, having a group of friends around will help you meet people in your new location.
It will be tempting to get that new car, nice place etc when you get your first job, but 1-3 years coming fresh out of college living like a college student will easily save you 10 later on.
And don’t discount what your expenditures will be. Lots of new ones that you will expect living in the real world, but also a few you won’t (e.g. the $50+ dinners when traveling for company business that aren’t necessarily accounted for in your company’s travel expenses…)
April 28th, 2008 at 7:43 am
One thing I’m sooooo glad I did after I graduated was track my mortgage via spreadsheet. When I bought my house, I kept track of every single payment on my spreadsheet and the running tallies of interest paid, insurance, principal payments, etc.
Tell them to download OpenOffice if they don’t have Excel and to keep track of EVERY loan they take out, even on Credit Cards and to track all payments and running balances.
For a $70,000 mortgage @ 6.25% and just minimum payments for 5 years we’ve paid over $20,000 in interest alone and the balance went down by about $7,000. Ouch, and that’s not even a huge mortgage compared to how much housing has increased here. Luckily, our house could now sell for 3 times what we paid for it then!
Now we’ve switched to Bi-monthly payments (versus once a month) and that alone has knocked almost 3 years off the term of the mortgage. We also increased the amount of each payment to speed that up.
April 28th, 2008 at 7:44 am
I wish:
1. I knew that as a graduate student I could open a Roth IRA
2. I was more aware of consequences of not saving actively and buying useless things like CDs, Gifts, Wine etc randomly
3. I had not laughed away my coupon-cutting roommates and instead embraced the method myself
4. I had started tracking my expenses in a simple spreadsheet
5. I packed lunches at least a few days per week
6. I cooked more at home
The list goes on. I did not *splurge* in the true sense but just not being aware of where my research assistantship was going amounted to that in the end.
Thank you.
April 28th, 2008 at 7:47 am
Read the Automatic Millionaire and The Wealthy Barber. Follow the advice. Live well. In particular, look at the charts showing how much money you can accumulate by investing early in your life.
April 28th, 2008 at 7:48 am
I love the question. As someone who’s weathered painful financial problems and is now in really good shape, I’d suggest to the college grads that they share resources to conserve and stretch their earnings. For instance, living with at least one housemate, rather than alone, can save 5k or more per year. This resource-sharing also cuts the emissions that drive global warming — a problem their generation cannot escape. My other favorite example is carpooling to work rather than driving alone, which saves me up about $10,500/year when you count depreciation. More details at
http://alison97215.wordpress.com.
Best wishes on your speech!
Alison in Portland, Oregon at Diamond-Cut Life blog.
April 28th, 2008 at 7:48 am
Wow. Thanks, everyone, for the great replies so far. I’m at the tail-end of a long weekend vacation, and didn’t have anything prepped for this morning. (Poor planning, I know.) Because I knew I needed help with my presentation tomorrow, I decided to post this. I knew I’d get some good answers, but didn’t expect this many or this quality. You rock!
April 28th, 2008 at 7:49 am
I am 23 years old and 1 year out of college. I like to keep the message simple which means 1-3 items so they are easy to remember. If i had to pick the 3 most important ones are.
1. Budget - This means track every dollar you spend and try to have a goal of spending less then you earn.
2. Emergency Fund - 3 to 6 months stashed away in a high yield savings account for those rainy days.
3. Save for Retirement - Its never too soon and compounding interest makes a difference
If you start with those 3 right aw3ay then everything else will come into place.
April 28th, 2008 at 7:51 am
I wish I had known the importance of having an emergency fund instead of relying on a credit card for emergencies.
Every time I got the card paid off, an unexpected vet bill or car repair would put me back into debt. An emergency fund has let me live debt-free for years now.
April 28th, 2008 at 7:52 am
Advice: Pick a community you like, where your workplace is within walking/biking distance. Don’t drive unless you have to. I drive two miles per day and it’s great to be impervious to the fluctuations in the oil market and money supply, unlike those who commute 70 miles round trip per day.
April 28th, 2008 at 7:53 am
1) Freedom is happiness, debt is slavery. Stay away from debt and you’ll stay happy. If you don’t have the cash in your checking account, then can’t afford to buy it.
2) You don’t need a car. I repeat: You do NOT need a car. I ride my bike, use the bus system everywhere I can. 75% of America is amenable to this lifestyle (it isn’t easy, but neither is credit card debt).
3) Live within your means. If you can’t manage to keep this equation in check (Means-Life=Freedom Residual) then first change/limit the “Life” term, not the “Means” term. The “Means” should be on YOUR terms, not your “Lifes” terms.
April 28th, 2008 at 7:54 am
Open a Roth IRA asap, even if it is only $250 your first year. College grads will be higher wage earners, thus Roth is such an outstanding investment for them b/o the tax ramifications. I started a Roth 2 yrs after college, but then didn’t put anything in during graduate school. Now that I am beginning to see the compounding interest effects, I wish that I had stuck to it during graduate school.
April 28th, 2008 at 7:56 am
You can start your talk with Mr. Micawber’s advice advice (from David Copperfield:
“Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.”
This pretty much sums it all up.
April 28th, 2008 at 8:03 am
The biggest thing I was lacking when I finished college (only a few years now) was how to develop a budget. I just paid for everything on credit card while in college and my expenses fluctuate so much I had no idea how to formulate a budget.
I would also say drive home the point of not carrying a balance on the credit card. Explain the Type A and Type B credit card users so they can choose the right path for themselves.
April 28th, 2008 at 8:04 am
Sitting down and planning out what all your monthly costs are going to run once graduating is really important. Then add in the repayment of school loans and retirement savings. I’m graduating in 2 weeks and have a job lined up, and was about to make some larger purchases until I sat down and tallied everything up and realized that I didn’t have as much spending money as I originally thought.
April 28th, 2008 at 8:05 am
I agree with Pete - get a credit card while you’re in school if you can avoid temptation and pay it off each month. It may be slightly different now than a year ago when I graduated, but lenders apparently like students b/c Mom & Dad will supposedly bail them out. I went through school on debit and a small allowance and waited until my first job to get a card. By then I’d payed the full security deposit for my first apt - just the most immediate effect of no credit. Then the bank would only give me a secured card (of course they were giving out NINJA home loans at the same time). Debit cards can’t chargeback, they have less fraud protection and low limits, which can be a problem if you’re buying a computer, books, or airline tickets that month.
April 28th, 2008 at 8:10 am
When you graduate and get a nice paying job, continue to live as if you were still in college.
April 28th, 2008 at 8:16 am
The points I would make:
#1 You can’t accumulate wealth unless you spend less then you earn its simple inescapable math.
A> If you put at least 10% of your income into investments - you won’t feel it will give you freedom later in life.
B> You are NOT your stuff- seek friends who value you not the things you have or can give them.
C> Trying to maintain an image of wealth will cost you true wealth.
#2 Since it’s a young crowd stress the importance of compound interest!
A> start NOW, to get the magic of compounding working for you!
B> Return rates make a huge difference- don’t settle for a 4% CD!
C> Stocks are the most reliable way to get the returns you need
i> Don’t fear a market crash- that is a BLESSING for the young!
ii> investing can be VERY easy using index funds- very little work, instant diversification, less knowledge required and superior long term returns!
#3 Getting rich quickly is very hard and pretty unlikely. Getting rich slowly fairly simple and possible for virtually everyone, especially with over forty years to invest! Ultimately though it’s your choice, are you willing to sacrifice a little now for freedom and security later, or do you want to work at McDonalds when you are 80?
-Rick Francis
April 28th, 2008 at 8:18 am
My tips:
1. Don’t just take the first job that comes your way. Research the salary for the area first and don’t be afraid to go to the negotiation table. Be up-front about why your skills are worth more. Document your own accomplishments at least quarterly, this makes updating the resume much easier.
2. Open a Roth IRA and max it out. Don’t delay on this one, because if you’re really putting your college degree to work, you will probably exceed the MAGI cap within 10-15 years.
3. Don’t buy a new car unless you can pay cash. It’s cheaper to pay for monthly maintenance than a monthly car payment. Also, learn to do your own vehicle maintenance.
4. Start an emergency fund. Set this up with a financial institution other than where your checking account is so you leave the money alone. Try to initially save 3 months of living expenses and work towards 6 months.
5. Pay off credit card balances every month. Also, get a credit card with rewards. Try to get a card that has a 0/low interest rate on the life of the balance transfers and transfer high interest balances.
6. Consolidate student loan debt. Try to get a low fixed interest rate.
7. Curb impulse buying. Make a shopping list before you go to the grocery store and don’t deviate, but allow for stocking up on sale items. Like my grandma said, if you don’t have the cash to buy it outright, you can’t afford it.
8. Save money for a down payment on a house. There’s no point in throwing away money on rent, not to mention the tax breaks of homeownership.
9. Open a high-yield savings account for major purchases and research your options before you buy. Pricegrabber.com and Pricewatch.com are my favorites for comparing lowest advertised prices. Slickdeals.net, passwird.com, and dealigg.com are great for getting deals. However, watch the impulse buying! Tuesday evening is the best day to buy on eBay, Sunday evening is the best day to schedule an auction ending.
10. Learn to cook. You can make your favorite meals at home for cheaper (and healthier).
-Rob
April 28th, 2008 at 8:34 am
It seems everyone here agrees that living with in your means is the most important thing you can do to ensure future financial freedom. You may want to stress that having monthly payments that you can afford doesn’t count. As a college student I am sure I heard the word “budget” but ignored it as a waste of time. It might help to give them some guidelines to shoot for instead: rent/mortgage less than 25% of take home, 15% to Roth/401k, etc. Also tell them it is ok to figure in some fun money!
April 28th, 2008 at 8:39 am
one thing I think is important is that many many new grads are going to make bad financial choices even knowing all the things they “should” be doing. They know they should fund their retirement, but they look at their check and just don’t know where the money could come from. They know credit card debt isn’t great, but they also know their earning potential will only go up and that they have things that they need/want right now. And you could never have told me not to buy a car. You can’t tell me that now:) Really smart people faced with building a professional life and possibly even a home from scratch on a not-large paycheck just can’t find the right path to walk financially. And anyone who has what they consider a “large” paycheck may find themselves living how their friends and co-workers do without any thought to if it really is how they should be living. So I think a discussion about real compromises and choices they should expect to make and how those will pay off is useful. Most of them probably know what they should be doing, but they don’t yet know how hard it will be to actually do it.
April 28th, 2008 at 8:40 am
Wow, what a great topic. Besides seconding Daniel’s rec for Suze Orman’s “Young, Fabulous, and Broke,” I’d add:
1) Don’t buy upscale furniture right out of the gate. Odds are you’ll move at least once, and there’s no way of knowing the layout of your next apartment/house. My old roommate purchased a beautiful queen-sized bed in our old place, and it wouldn’t even fit up the stairs in our new one. IKEA and/or Craigslist is the way to go here, at least for a few years.
2) If you have the opportunity, live off-campus while you’re still in college. It’s often less expensive than the dorms, and the experience will help immeasurably when you have your first apartment in the Real World. My junior year place taught me basic bill-paying, cleaning, and how to live happily with (seven) others.
3) INTERN. Interninterninterninternintern. For money, if your chosen field offers it. There is no better way to gain experience and make contacts when you’re an undergrad.
4) Learn to cook, at least marginally so.
5) Develop a taste for cheap beer. Pints of Guiness add up after awhile.
April 28th, 2008 at 8:42 am
Probably have said it — but I’d like to hear again, PROTECT YOUR RETIREMENT! I have SOOOOO many friends who dipped into 401K’s to alleviate debt. Basically, they stole $100,000 from their 65-year old selves. I think the temptation is always to “repay” ourselves, and it just can’t happen. And who knows where our federal retirement programs and even private pensions will be in 40 years…
April 28th, 2008 at 8:45 am
I think sharing a successful roadmap and strategy that they can use post graduation and some kind of handout to take with them with the info and your web address for questions might be good. Here are some things I wish I knew when I got out of college:
1. Expensive clothes/ipods/stuff don’t impress anyone but yourself. These days you can buy clothing for 1/2 what you could before the cheap manufacturing all over the world started. Kids are obsessed with image, but you can find it for less at Target, WalMart, H&M, XXI, Old Navy and other discount stores. Same goes for video games and other toys, these big purchases hold back paying off student loans and getting on with your life. Now it is common to be able to buy electronics second hand or wait until prices come down because it only takes a few months.
2. Pay off student loans first. This should be first priority before taking on new debt if possible. If you are a lucky one and can move back in with mom and dad to save $$ do it. You will pay off things 2-3x faster. Otherwise, you will end up like some of my friends in their 30’s with kids and still paying them off.
3. Set a budget and stick to it. Don’t always say yes when friends call to go out. Don’t always say no either. Its a moderation thing with money and focus when you have to go to work in the morning.
4. Focus on figuring out a good job for right now and a job you want in a few years. Sometimes you have to take a job that is less money/responsibility/opportunity first when you have no experience just to get some experience to put on a resume and prove you’re employable. Then you make your move after a year or two and get closer to your goal. You may need 2-3 or 4 jobs to work up to the level where you really want to be, but it’s a worthwhile process.
5. Don’t buy a house or condo unless you plan on living there for 30 years. Seriously. That is how long you have to live there to make a profit now. Don’t get tied into a huge financial committment like that yet.
6. Enjoy saving some money and investing it each month.(in addition to the 401K of which you have to participate in) Don’t just go with what a commissioned broker says to invest in though, do the research yourself and build an emergency fund first and a nest egg next. Starting this early and getting into the habit is a great thing.
April 28th, 2008 at 8:51 am
Avoid student loans like the plague.
I kept getting them because the culture around me told me they were “no big deal” because they were “good debt” and I wasn’t proactive enough to figure out if that was actually true. It wasn’t. Now I’m $100,000 in debt on a $45,000 salary. I can’t stress it enough: Avoid student loans like the plague!
April 28th, 2008 at 8:56 am
This may be controversial, but I would say, “Pay off your student loans as quickly as possible!” You may get a higher return on your money somewhere else, but paying off the loans shows grads that they can do it–they can be out of debt! When student loans are so high or drag out so long, it can be discouraging and frustrating and influence people to say, “What the heck! I already owe so much! I’ll buy X, Y, and Z, too!”
April 28th, 2008 at 9:04 am
Out of college: But definitely the idea that I could’ve started investing (and compounding) back then and my money would have more time to get bigger.
April 28th, 2008 at 9:08 am
I’m 5 years out of college this May. I think one of the biggest pieces of advice is to NOT go crazy once you start getting that steady paycheck. The new car bug bites and many grads end up getting in over their heads when they realize that they now have to support themselves. This entails rent, bills, college loan payments (that 6 months grace period flies by fast), insurance, and day-to-day expenses. I would suggest that if they had the urge to buy an expensive toy to wait until they have over 6 months of regular monthly payments under their belt until they commit.
April 28th, 2008 at 9:08 am
It is unfortunate because no matter what you tell them, only 1 or 2 will actually listen. I graduated not even 2 years ago and am more in debt now than I was then, even though I “knew” better and I have been working to pay it off. I knew all of the “do this not that” and I broke them anyway. The most intense spending period was the 6 months between when I was free from college and before my student loan payments kicked in. I would say several things. 1) Live cheaply. Rent, don’t buy right away. Save something first. 2) Analyze the financial ramifications of pets before you get them. We own 2 dogs- 1 @ 50 lbs and 1 @ 115 pounds. This pretty much prevents us from renting anywhere. If you want the great dane, fine, but think first about where you will live. (BTW, I love my dogs and wouldn’t trade them for the world.) 3) Avoid CCs if at all possible. It is SO easy to rationalize once you have a balance. If they already have a balance, encourage them to work a second job while they are young to pay it off. 4) Don’t fall into the trap of thinking that once you graduate, you will get an awesome paying job and be able to live how you want.
That’s all I can think of for now. My situation is slightly different than most as I got married halfway through college and so lived off campus and my husband worked, but we still couldnt make ends meet. That debt haunts us more now than anything else. We just want to get rid of the CC debt more than anything.
April 28th, 2008 at 9:14 am
1) You need health insurance. Yes, even if you’re healthy. You do absolutely need it, it is a necessity. If you’re healthy and don’t have regular prescription needs, then go on with the cheapest plan your company offers, but you NEED HEALTH INSURANCE. GET IT. NOW.
2) 401k. At the very least, get your match. Do it as soon as you’re eligible. Trust me, you’ll never notice that the money’s not there. I made less than $700 per month last year and never missed the $10 or so that was deducted for my 401k.
3) It is entirely possible that you will still be broke. It’s even possible that you will be more broke. Yes, it sucks. You’ll get used to it. Learn those lessons well, they’ll help in the future.
4) Give it away. even if it’s just a dollar a week in the church basket or a tiny contribution a month to your favorite cause. You are never too broke to give.
5) Ditch the credit cards. ESPECIALLY if you wind up being broker than you were in college.
6) Sometimes it takes awhile to figure out where you’re supposed to be. That’s completely all right. So long as you’re moving towards *something*, you’re not failing. But pay attention- sometimes getting to the right spot means taking big risks with little or no financial reward. It’s much easier to take those risks when you only have to worry about you, so now is the time to do it.
April 28th, 2008 at 9:23 am
I have one “child” who graduated 3 years ago and another one who will graduate in 2 weeks.
That first BIG paycheck after living on Ramen noodles for 4 years is so easily blown!
The best advice I think is to make a promise to not shop or buy anything but necessities for 8 months! (WOW THATS A LONG TIME) but slowly new grads accumulate debt without even realizing it. Sure the first month of paychecks are Wonderful… but then finally you hit the day when they start taking out health insurance and 401K money (if your smart) then Mom and Dad remind you that you need to get your own car insurance… ahhh then 6 months out of school the government sends you your first school loan payment… and then that computer you bought as a senior in high school dies (it did love you all the way through college)– and then on top of that you need renters insurance and deposits on electric, water and apt’s.
All I am saying is that if you can somehow convince a new grad to “continue” living like a pauper for those first 8 months then they will get an idea of how much money they actually have. Before they start charging (thinking they can pay it off next month!) and taking on new car loans etc.
April 28th, 2008 at 9:23 am
I would tell them not to use spending money and purchasing items as a salve for those bouts of depression and/or unhappiness that will crop up at some point during their professional careers or life struggles. At best, it’s a short term fix and will eventually lead to further unhappiness and frustration as you try to claw your way out of debt.
April 28th, 2008 at 9:25 am
I, like you, left school long ago. What do I wish I had known about money? EVERYTHING. Especially about investing and the power of compound interest. After that, I wish I had been educated about the pitfalls of credit and the real cost of living beyond your means: forfeiting your freedom!
But most of all, I wish that someone could have convinced me at 18 that I was NOT going to live forever, that I was NOT omnipetent (sp?), that these were NOT necessarily the best years of my life and that 30 is not old. Otherwise, I may not have listened anyway.
April 28th, 2008 at 9:25 am
I just graduated last May and I am in an apt. where I am definitely overpaying. I can afford it, but it’d be nice to have the extra money that I could have saved by living somewhere cheaper. If you’re in your 20s and single, you do not need a crazy nice apt… especially when you’re stuck in a lease. Get a roommate, live somewhere cheap and save the nice digs for later!
Also, cook at home.
April 28th, 2008 at 9:25 am
When you accept a job, if you go through some sort of orientation, and you have benefits, be sure to accept everything to the maximum for a few dollars more of deductions. You may think “nah, I’m young and healthy and don’t need this, and I need the $15-20 more now.” The medical insurance covers both longevity, medical, accidental, life, and long-term. As recent college grads, we don’t plan to stay with a job for decades, but if it happens, unless you are in perfect health the rest of your life, you won’t be able to sign up for those “extras” without exams. Take advantage of the open enrollment at the beginning of your probation-permanent Benefits sign-up. You can always cancel; you may not be able to add it easily again. It may deduct $10-20 but it is DEFINITELY worth it. I wish I had. Over the years, I have known two 20s-aged co-workers get hit on a bicycle and a motorcycle. They used their extended medical to get back on their feet; as they had signed up at the beginning of their employment. They needed it within 2-5 years of employment. I’ve been employed 25 years at same place, and now both my husband and I wish I had extended coverages, but our health won’t let us pass the medical reviews. Even the yearly open enrollment periods that jobs may offer are never as good, or simple, or as “open” as that initial sign-up. Also, if you get married, you can add your spouse, but you cannot add those start-of-job higher coverages! Plus, sign up for any IRA-matching-or whatever. Some employers enforce it, and I was very lucky to have one of those employers. Keep that in mind, especially for city, state & Eductational employers.
April 28th, 2008 at 9:32 am
I didn’t have very high student loans when I graduated, but they sort of “normalized” debt for me. I had a hard time for a while, but once I was doing better financially, I didn’t really start working on debt because I didn’t think I could do much, or that it mattered much.
I did catch myself in reasonable time, but I see a lot of my friends who feel that debt is normal, and it seems to be something carried with school loans.
April 28th, 2008 at 9:33 am
Thought of another one. Sign up for your blog, or Dave Ramsey or Clark Howard. Find a blog or a podcast that you subscribe to on a daily basis. Read it. Listen to it. It will give you ongoing reinforcement to apply some concepts to your life and finances. You’ll hear about mistakes other people have made and remember to step around those pitfalls. It will encourage you to watch what you spend, and who you trust. It will give you real-life experiences from people who have walked before you on the same road, and you may avoid some problems. My husband says the best investment he ever made was to give me his ipod, and get me to listen to Clark Howard & Dave Ramsey. Suddenly, I have the interest to increase our savings, take trips responsibly, spend less and save more. Plus, on my own, I’ve subscribed to your blog and one other. They encourage, educate and enthuse me.
April 28th, 2008 at 9:34 am
List your priorities. If money is anywhere near the top three, then you may be following the wrong path.
Once your basic needs (food, clothing, shelter) your true happiness and well-being will only be met from internal sources, not the external sources of the matarial world.
Pursue self-awareness, which at a basic level, would require the alignment of “what you do” and “who you are.”
The greatest mistake would be aligning “what you do” with the expectations of social conventions, your parents, or your friends…
April 28th, 2008 at 9:37 am
I’ll be finished my undergrad university degree in two years, and I’m hoping to get my CA through one of the big firms, and then pursue my MBA somewhere.
I guess the obvious answer is start saving to pay for my MBA now, but are there any other things I should know about grad school? I assume I will make a fair amount while getting audit hours at a firm, enough to cover living expenses and put a set amount away. I have a student credit card that earns me money towards a car (TD GM Card) and I much prefer keggers to going to the bar.
So, I want to start saving for when I graduate, to start an online business, as well as save for a graduate program. Advice?
April 28th, 2008 at 9:40 am
All of the above advice is good but the thing I found was how much my habits were like my parents. How they dealt with money is how I deal with money. My dad was a spender and my mom a saver. In my 20s I was a spender and now I’ve switched to the other side and am totally focused on paying off all my debt.
So for students getting ready to start, I would advise them to take a hard look at how their parents handle money because the decisions they make (or don’t make) reflect how money was handled when they were growing up.
April 28th, 2008 at 9:43 am
In addition to the many great comments about credit cards, compound interest, etc…I’d add this…
Know how to access your credit reports and keep tabs on your credit score. ID theft is always looming (speaking from experience) and being able to track those reports helps bring some peace of mind. Not to mention, I love watching my credit score increase
April 28th, 2008 at 9:43 am
1. Pay off your credit card balance monthly
2. Do a demonstration of the power of compounding interest, especially at their age.
3. live within your means.
April 28th, 2008 at 9:48 am
Showing an actual tax stub listing the taxes working adults pay might be helpful. I think a lot of new grads get in trouble when they take their annual salary, divide by 12 and think that’s how much they have to spend. Taxes & insurance take a bigger chunk than lots of young people realize. (Of course, you may just scare some of them into grad school with that one!)
April 28th, 2008 at 9:49 am
I just graduated and wish I knew a bit more about prioritizing paying off student loans vs. putting money in my 401k. My wife is still in school through December.
We’ll only have about $8000 of student loans when my wife graduates in December, but if I skip out on putting money in my 401k, we can keep that down to about $2000 and have the loans completely paid off before the interest starts building on them.
To me it makes more sense to not take on an extra $6000 of debt and skip the 401k till January, but everyone say “max out your 401k”.
April 28th, 2008 at 9:52 am
There’s plenty of good advice provided above. The only add on I haven’t seen is that you may want to mention that there are plenty of people out there who want to help you spend your money. They’ll be happy to put you in a car because you can afford the payments. They’ll be happy to sell you a Big Screen TV because you can afford the payments. As a matter of fact, pretty much anyone you talk to will assure you you can afford the payments for whatever your needs are.
I found that after school and with my first job I took on two new car loans (me and my wife) and loans (via agreements or via Credit card use) for furnishing the apartment, not to mention the student loans I owed, which suddenly left me a hell of a lot less per month to live on than I’d planned. A good chunk of that was by listening to the people telling me that on my new salary I could easily afford the payments.
April 28th, 2008 at 9:54 am
I suspect speaking abstractly (live within your means) won’t stick. I’d really specifically point out common mistakes that most grads make.
1) If you can, DON’T buy a new car immediately. This is a common mistake I see friends making, when the first job after college often doesn’t pan out.
Now you’re even more burdened by debt, and have less freedom to switch careers and make new choices.
2) Show the value of compound interest and how much they lose by not saving for retirement immediately. A lot of people have NO idea they should already be saving for retirement, and if you ask they might tell you they’ll wait till their 30s or 40s.
3) Show them a bunch of quotes from smart people that says stock picking for the average person is stupid. Show the value and simplicity of index funds.
4) Speak about the value of an emergency fund, most people will have a cash cushion and think “I have enough for a PS3!”
But have fun! They should have some good questions for you.
April 28th, 2008 at 9:59 am
One of the things I did right after graduating from college was to take an adult education personal finance class at the local high school. The course was taught by a financial planner and provided good basic investing, budget, credit, debt information. I still remember the charts documenting the various outcomes for retirement depending on investing start date.
April 28th, 2008 at 10:00 am
when you discuss with them compound intrest, show how it helps (ROTH, 401k) and how it hurts, (credit card debt). Don’t talk to them about NOT having a CC, as they will take you to be an old foogie, and not listen.
Maybe something about how you don’t need to match the life-style of your parents right away, or of your friends? Your parents had Years and YEARS to get to the life-style they are now. That is something that i have been coming to grips with since i left college (age: 27)
April 28th, 2008 at 10:03 am
I agree with others, avoid the new or leased car trap. Keep driving your current car, pay it off, once it paid off, stick your monthly payment into a savings account to save up for the next car.
April 28th, 2008 at 10:15 am
Here’s my advice (I graduated May ‘07):
1. LIVE WITH YOUR PARENTS!!!! Why hasn’t anyone else mentioned this? If your parents live within 25 miles of your new workplace, this is the best bet. Even if you only pay them measly rent and do chores around the house, this will EASILY save you tons of money. My fiance saved $25,000 by living at home for a year and a half after graduation. It is a big trade-off, but it’s totally worth it.
2. I will also recommend getting a job in math, science, or engineering. My fiance and I both graduated from a technical college and are taking in 125K pre-tax combined (he is 2 years out of undergrad and pursuing his masters, I am 1 year out of undergrad). Our rent and bills are only costing us 25% of our monthly income. The rest is basically going to savings, and we are both saving roughly $2K a month.
April 28th, 2008 at 10:30 am
That true luxury is not having a bigger TV; it’s knowing that if the car suddenly needs $1800 of work, you can cover that without selling a kidney.
April 28th, 2008 at 10:44 am
1.) It’s important to dress well, but they can go to a thrift store to fill in their wardrobe.
2.) They’re young, so a low-paying job that advances them into a career with future prospects is better than a “high”-paying job that doesn’t advance their interests.
3.) Impress people with hard work, not brilliance.
4.) They should plan life like they planned their classes–each job or task they take on should build towards their FUTURE.
5.) They can be an artist, if they want to.
6.) They should start talking to their friends and family about their finances NOW. Everyone knows they have huge financial aid loans and probably some credit card debt. It’s okay if that’s a part of their conversation when they say they can’t go out for a beer. Practice. In five years, with ten-thousand in credit card debt, it will be really hard for them to fess up to their bank account.
7.) Money isn’t everything… until they get in debt.
April 28th, 2008 at 10:45 am
1. $25,000 isn’t a lot of money. After having worked for $7/hour for so long, when I got my entry level job, I thought I was rich. I didn’t go into massive debt or anything, but I really spent a lot of money frivolously for several years and that kept me living in apartments longer than I really needed to.
2. Don’t lease a car. Ever. Leasing makes sense if you’re going to drive a new car every three years but there’s no reason for you to need a new car every three years so don’t do it.
3. Don’t buy a new car, ever. Buy a quality used car and either pay cash for it or pay it off as quickly as possible. Maintenance on a car with 100,000 miles on it is expensive but still a lot less than new car payments, and many cars being made today are designed to last 200,000 miles or more. Don’t believe the hype that used cars are unsafe or unreliable. It’s a lot better to have a 7-year-old car in the driveway of your house than to have a new car in a parking lot outside an apartment. True fact: My mortgage cost about the same amount as my rent plus my car payment, so once your car is paid for, you can afford a house.
April 28th, 2008 at 10:47 am
I’ve always found information about compound interest to be powerful. I especially like the illustrations showing two investment scenarios: one starting early with a smaller investment; the other starting late with a much bigger investment. They end up in the same place, but the earlier contributor lets his/her money do the work.
BTW, great site. Congrats!
April 28th, 2008 at 10:48 am
I graduated college last June, and I wish that I had known the importance of a budget then. My job didn’t start until August (though I had gotten the job in March, it just didn’t start right after school), and I got into huge credit card debt between June and August. When I started my full time job, I just thought how this was so much more money than I made part time in school, so I don’t have to worry about a budget. Then I got in more debt. Finally a few months ago I started a budget, and it has been amazing. I’m achieving my goals, and I feel financially sound (albeit still in a bit of debt). So yeah, budget!
April 28th, 2008 at 10:49 am
I just graduated and the two things that are most important for me are: Set an aggressive savings goal and do it through automatic Direct deposit into an account other than the one you use for living expenses and don’t touch the savings except for reasons that were factored into your savings goal. Automated savings like this remove a lot of stress, it doesn’t really matter where the rest of the money goes so you need not worry about it. Second, except for student loans, pay everything in full every month. Using electronic bill pay means you can setup a bill to be payed in less than a min whenever you receive one in the mail so you never end up paying penalties.