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New Grads: Four Money Facts Worth Knowing

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.

About Amber Gilstrap

Amber is a twenty-something CPA from Kansas City, Missouri who loves writing, working out, and---of course---finding fresh ideas for saving money. Follow her on twitter @ambergilstrap.

Comments

  1. I couldn’t disagree more about moving in with parents. The money savings is not worth it nor does it teach you the life skills/lessons needed to be an adult. Isn’t that why you went to college?

  2. I learned a lot of life skills in college, but I paid off all my student loans while living at home. So it really depends on each individual’s situation. If someone were to ask me if they should move in with the ‘rents for a year to save money, I would totally encourage them to do that. However, I agree with you that there are cons to living with your parents just like there are with any choice.

  3. David Weliver says:

    I definitely know some people who at 22, 25 or even older haven’t had to learn some life skills yet because their parents have done too much for them…but interestingly enough, none of them live at home.

    If you move home, blow all the money you’re saving on rent and then ask mom and dad for more…then yes, you’re definitely not going to learn life skills. But if you consciously move home for a year to save up an emergency fund or pay down some debt, I’m not worried about your life skills.

    As for the savings not being “worth it”, let’s chalk that up to a personal decision. Everybody’s relationship with their parents is different, and everybody puts a different value on independence and privacy.

  4. awsome post, i graduated last year, and did basically everything listed above. i still live at home, for a few more months, and have been able to save over 70% of my take home pay because of no rent, utlities, or food expenses. obvisouly this doesnt work for all graduates, but i have a great relationship with my parents and have had no issues. i didnt buy a new car, just a solid used car, paid cash for it, and still have no debt. the biggest killer has been the more expensive social life. gone are the frat parties and 5$ keg parties, but i think im learning each week how to control and navigate the expensive after college social scene.

  5. i think that my social life keeps up with my bank account perfectly; both have taking a major beating in the recent past :)

  6. OK – I’m way over 30, 39 to be exact, but looking back, I have to say that the people that lived with their parents for a few years made out better in terms of savings and didn’t suffer in the long term.

    Think about it: it might seem horrible to live with parents in your 20′s, and it probably is for many people. But you can save a ton of money in rent/mortgage, etc. Think about the time value of money and compounding. It could pay off big time.

    As long as living with them doesn’t mean you’re passing up a great career opportunity, it could be short-term pain for long-term gain.

  7. Melissa says:

    I did not live at home after college. Nor do I feel I need to. I learned these finance lessons in and after college and am still learning. I am saving money on a regular basis though and have accumulated a good amount where I feel secure. Yet I have some friends who live at home and blow all their money on trips and designer clothes. Living at home is not necessarily better unless you use the money you are saving on rent towards a savings plan.

  8. I currently am in college living on my own. I have since I graduated high school, without any parental help at all. I’m still in school for another 5 quarters & I’m 23yrs old. I’m moving home next month. I lost my job so I’m going home & I’m going to pay off my car loan & my small student loan within a year. I have to save up for my cpa review & test for when I graduate. I can’t afford to live on my own anymore since rent costs $750 plus everything else. I’m not really excited to move back as I don’t really get along with my mom. But it’s free rent, all I have to do is help out with groceries & household goods. Who can beat that? And if people do have to move back in, yo will most likely be out of the house for a major part of the day. I will hopefully be working 25hrs a week while going full time. I’m hoping that’s enough to keep me busy and out of the home. :) good luck to those who move home… Just think of all the money you will save & keep telling yourself that :)

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  10. Have to luv admn for this post. Fantastic timing with today’s headlines.

  11. I agree that moving back home with your parents after graduation can be a smart decision IF you have a plan and are doing it for the right reasons, i.e, to start making a dent in student loans, or to save up for a place of you own. I lived with my parents for 3 years after graduation. I was able to save $30,000 over those 3 years (it would have been more, but a 5 month job loss forced me to decrease my savings for a while). I used that money for a down payment on a condo that I absolutely love. Had I not been disciplined with my saving and spending, living rent free for 3 years could have done more harm than good. However, it definitely paid off and I could not be more happy with my decision.