Congratulations! You've survived college and a commencement speech that left you feeling like you are ready to go out and conquer the world. Whether you graduated at the top of your class or barely slipped by, the slate is wiped clean. It's time to start your real life. The decisions you make in the coming months will have a big impact on your future.
That's especially true of financial decisions. Here are nine steps to take to make sure you're headed in the right direction postgraduation.
The first thing you should do once you get that diploma is to take a good look at your finances. You're about to take your first job, and your starting salary may lift you into a different lifestyle. You will have the challenge of matching cash income and outflow.
Start by listing all of the money you owe and all the expenses you expect. Next, make a budget based on that information. Find a way to save money, even if it is only a small amount to begin with. One way to begin saving is to open a savings account at your credit union. Get in the habit of putting a few dollars into your savings account each month and you'll be surprised how much money you will have saved by the end of the first year. Use direct deposit and payroll deduction to automate these steps and you're ahead of the game.
According to a survey conducted by Nellie Mae, the student-loan financier based in Braintree, Mass., the typical student graduating from a four-year college will have to pay almost $19,000 in student loans. Now is the time to start figuring out how to pay off your loans. Step one is finding out how much you owe. If you aren't sure, use the free "Loan Locator" service of the National Student Loan Clearinghouse to obtain that information.
The next step is to figure out how much you can afford to pay on your student loan each month. Education lenders generally recommend that student-loan payments not exceed 8% to 10% of the borrower's gross monthly income. Once you figure out how much you can pay on your loan, create a budget for yourself and stick to it.
Although living in that trendy downtown loft sounds great, it may not be within your price range. Be realistic. You have to live somewhere, and your new job will dictate your housing location choices. Because housing likely will be your biggest expense, make sure that you comfortably can afford the monthly payments.
One way to offset the cost of housing is to find a roommate. Sean Hearden, a recent college graduate who lives and works in Chicago, wishes he had a roommate to help share living costs. "I could pay off my car loan a lot faster with the money that I would be saving if I had a roommate," he said. Hearden estimates that he could be saving as much as $250 dollars a month by sharing rent and utility costs with another person.
Or even consider the dreaded alternative of moving back home to save on rent. You could put the money saved living at home toward a down payment on a condo or house where your monthly payments will go toward building equity.
If you rent, don't forget to buy renter's insurance for your belongings.
Although it may be tempting to go out and buy a new car as soon as you get your first paycheck--have patience. Drive the old clunker for at least six months and make sure that you can put aside enough money each month to make the payments on that new vehicle you have your eye on. Putting aside a monthly payment can help determine what range of payments you can afford before you sign any contracts, and it also will build savings for a down payment when it comes time to purchase a new vehicle.
Before purchasing a new vehicle stop by your credit union to find out how a lender there can help you with your
Another factor to consider when purchasing a car is the insurance payments. As a single in your 20s, you've moved into a high-priced car insurance category. That could put a big dent in your monthly budget--along with unexpected car repairs.
Having both a clear sense of where you would like to go and what you would like to do in life are critical to future success. Start out by making a list of goals that you want to reach within the first six months after graduating from college. Whether your goal is finding your first job out of college or putting $50 a month into a savings account--work toward those goals, and once you have reached them aim higher.
Keep in mind that successful people set goals--both short term and long term. No matter what your choice of employment, you'll need to measure your achievements along the way. But remember not to be too rigid in your choices. As your career advances, your original goals may change along the way.
And remember, too, that the people at your credit union are ready to provide the services and support you need--as you get started and as you move through your life.
Lisa Johnson is a May, 2004 graduate of the University of Wisconsin-Madison. She has a double major in journalism and in Spanish.
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