Even though I’m in denial about it right now, I will in fact be graduating from college in just a few months.
With that fact comes a lot of worry — mentally, I don’t think I’m prepared to move on yet.
But, as my mom says, the best antidote for anxiety is action, and I know there are steps I can take to make the transition easier. For one, I can at least make sure I’m in the best financial state possible.
The millennial generation takes a lot of flak for transitioning poorly into the workforce, but we don’t have to perpetuate the stereotype. Let’s be responsible by ensuring we’re in the right financial state when we strike out on our own.
1. Remember we’re not necessarily in the same boat as our friends.
This realization has already been a tough pill to swallow. Several of my friends already have full-time job offers, for which they’ll be making close to six figures right out of college.
I’m proud of them, but it also means right away we’ll be in different financial positions in life. My goal is not to compare myself to them. They might be able to live a different lifestyle than I’m able to, and that’s OK! As long as I’m not trying to keep up with them, and I focus on my own situation instead of theirs, I’ll be able to stick to my own personal budget. As we like to say on Money Under 30, personal finance is personal!
2. Make sure your rent is reasonable.
Can you live at home or with family members after graduation? Can you live with two roommates instead of just one? Can you sacrifice some square footage?
These are all good questions to ask before settling on your first apartment. Believe it or not, the huge apartments we grew up watching on “Sex and the City” and “Friends” are not an accurate representation of what’s affordable right out of school (or maybe ever). Do a thorough search (either online with a site like ApartmentFinder.com, or better yet, with a realtor) before determining your best option. For most of us, housing will be our biggest expense. If you begin modestly, you can always upgrade later — a much better feeling than having to downsize.
3. Remember your student loans and other debt.
These payments come first. We’ve all heard the horror stories of what can happen when you neglect to pay these types of bills … putting them off is just about the worst thing we can do.
Being responsible doesn’t necessarily mean paying them as quickly as possible, but it does mean making them a priority.
4. Make sacrifices when necessary … but don’t be too hard on yourself.
Numbers-wise, how much should we be saving at our age?
Experts suggest a 50-20-30 strategy: 50 percent of income should go to “essentials” (bills, transportation costs), 20 percent for savings (2/3 for retirement, 1/3 for emergencies) and 30 percent for things that we want.
If you think about it, 30 percent for “wants” isn’t bad! The trick is to be conscious of how much we’re actually spending, though. You can easily go over that 30 percent with a big purchase (or more likely, with a lot of small ones), so keep track if you have to — even if that just means scrutinizing your bank statement at the end of each month.
That said, you should be prepared for the very real possibility that 50 percent your entry-level salary may not cover all the essentials. That may mean sacrificing some of your “wants”, or finding some side income the first few years on your own.
We can start this mentality in the months leading up to graduation, as well. It’s tempting to throw caution to the wind and blow our remaining savings while we can, but college isn’t our last chance in life to have a good time.
If you can save even $1,000 by skipping that extra cocktail every now and then or cooking at home more, those savings could be a deposit on an apartment or new clothes for work you won’t have to put on a credit card.
Having a little cash in the bank sounds like fun to me.