Graduation season’s just around the corner, and soon-to-be grads nationwide are plotting the next big move. Many of you coming out of college may soon start earning your first steady, full-time paycheck (and it will hopefully be bigger than those $8-an-hour jobs you used to work over summer vacation).
But with a new income come new expenses.
The transition from college to real life can be a culture shock…especially on finances. It’s easy to get spend happy with your new lease on life, but before you go out and buy the BMW you’ve been eying since your senior year in high school (and yes, no matter how meager your first full-time salary, there’s an auto dealer somewhere that’ll approve that loan) take these four post-grad money tips into consideration:
Mom and Pop Are the Best Landlords
Last week, I wrote all about how to get a cheaper rental rate. But if you want to be really savvy, avoid paying rent altogether. I know you don’t want to hear it, but why not try moving back in with Mom and Dad?
Your parents probably won’t charge rent (or little if any at all), will probably pay all the utilities, and they might even foot the grocery bill. What’s not to love? If they’re willing, and you think you can forgo your sanity for six months to a year (I’m kidding), it might be wise to consider moving in with Mom and Dad for a while after college.
Yes, after four years of independence, it’s hard! But with such low living expenses, you can start paying off those student loans or saving for an apartment of your own. I managed to survive living with my parents for a year after college and my finances are still thanking me today.
New Cars Aren’t a Good Investment
So many people think they need to buy a brand new car as soon as they graduate from college. True: some grads may need a new car since their college ride is about to kick the bucket, but many of us can get by on the same wheels for a while.
If your car is starting to cost you more in repairs than it’s worth, than it might be time to buy a new car.
That said, it’s not always the best idea to buy a brand new car. I made this choice right out of college and now wish I would have opted for a used car. I figured after four years of college and landing a full time job, I deserved to take out a $17,000 loan and buy a brand new car. But I’ve since realized that hot- off-the-lot cars aren’t the best investment…in fact they’re not really an investment at all.
Brand new cars depreciate rapidly…as soon as you drive them off the lot. And the value of a car continues in a downward spiral for the rest of its useful life. So, if you’re in desperate need of transportation after graduation, consider scouring the used car section of the want ads for good deals or check out the certified used cars that some dealerships offer.
Your Bank Account Won’t Keep Up With Your Social Life
In addition to your new work life and financial independence, your social life may blossom after graduation. Hanging out with friends and even going on dates may become the foundation of your evenings and weekends. It’ll be tempting to follow in friends’ footsteps and spend loads of cash on daily happy hours, dinners, or other events.
You can’t avoid a social life in an effort to save money, so you’ve got to find a happy medium. Work out a budget with your new income and decide how much you can spend — not what your friends can spend — on entertainment every month. Of course, allow yourself a bit more fun money than you did in college now that you’re a working guy or gal. Just figure out what maximum amount will allow you to save for other things like a vacation, a house, or retirement.
It’s All About BALANCE
I’ve mentioned before the importance of balance to everyone’s financial situation. A life change like college graduation upsets the balance of your budget. That’s okay; you’ll just need to sit down and figure out what works best for you now that you’re not eating dorm food or relying on your parents to deposit $100 into your bank account every other week.
Budgeting after college graduation can be tough and confusing. If you know what’ll work best for you instead of trying to keep up with everyone else, you’ll be setting the foundation for a prosperous and happy financial future.