Ah, you have arrived. You’ve spent the better part of the last five years, six in most cases, working to get to this point…to land your first job right out of college! You have your ideas of what this day and the future will be like. As you think back to your first day of freshman orientation, the freshman Dean creates visions of what awaits you. In a voice that could rival Thano’s from Infinity Wars, and with the wit of former Notre Dame football coach Lou Holtz, the Dean begins to paint the tapestry of your future. “You will have an office that will overlook the city, a personal parking space, keys to the Partner’s restroom and last but most important…monetary reward, moola, cha-ching, and old fashion money!! The Dean continues, "You will no doubt be captains of your industry, way makers, big-baller shot-callers. Your name will be mentioned in the same breath as Buffet, Jobs, Gates, and Stark.”
Buzz, buzz, buzz. Reality sets in. You wake up to the alarm on your smartphone. You’ve been dreaming again, and you need to get to work. It is as the bumper sticker says, “I owe, I owe, it’s off to work I go.” You arrive to sit in your cubical with no windows, the oldest computer in the office, a printer that you share with everyone else, and a desk chair that is as comfortable as a park bench. You go to work to prepare for what is coming six months down the road, another first in your life, your first student loan payment!
This is a scenario that is played out all over the Country, whether it is the maroon school, the burnt orange school, the yellow and purple school, and yes, even the blue and yellow school. The truth of the matter is that more times than not, you finish school with a vehicle that was on its last leg, living at home with your parents, and a mountain of school debt hanging over your head. You have spent the better part of your time in college studying for class, possibly working a part-time job, and planning the events of the upcoming weekend “partying”. You have successfully completed all the requirements of higher education. You have now entered the world that your parents have dreamed of…financial independence or as the kids like to say financial adulting! This can be an exciting time, as well as a stressful time. Where do you begin? You will, more times than not, be given information that you might have heard before in passing conversation: salary, health insurance, 401k’s, contribution matches, taxes, and exemptions. It is very well explained during the 30-minute HR introduction on your first day, and after that, you’re taken to your desk where you will commence to train for your hired job. All the while, you are texting your friends that don’t have jobs about how great your job is. It’s sink or swim now, you want to be able to prove that you can be self-sufficient and independent. You are going to have to learn the b-word, “budget.” A word the federal government still can’t comprehend. You are going to have to learn to budget your time, but most importantly, your money.
There is a memorable quote from an old Batman movie that constantly rings in my head. The Joker is moving in on a rival Mob boss territory, points his weapon at him and says, “Why Eckhardt, you ought to think about the future” and pulls the trigger. There is much wisdom in this statement and one that not many take seriously. You’re now on your way to managing your own resources. Basically, you need to put together a household budget. It doesn’t need to be elaborate, like the federal budget that runs into the trillions of dollars and “never” balances. It can and should be fairly simple. For this exercise, you can find templates on the internet, follow the one that most applies to your situation. For example Every Dollar is an easy monthly template with free sign-up and can be used with your smartphone. But always be sure to start/implement “the budget” at the beginning of each month. Here are some suggestions for a template budget. Follow the “KISS rule”.
Keep It Simple Silly!
- 1) Pay yourself first. Establish a rainy day fund. If you are in debt, establish a $1000.00 starter rainy day fund.
- 2) Pay off your debts as fast as you can. Especially any school debt. Yes, this might put a damper on your social life right out of college (AKA staying with parents a little longer than planned), but it beats the stress of trying to pay on debt and accruing interest. See Forbes article concerning Debt Snowball Versus Debt Avalanche.
- 3) Once “ALL” of your debts are paid, establish three to six months of living expenses. Go back to your household budget for this information.
- 4) Invest 15% into retirement. (i.e.) Roth IRA, 401k, etc. Rest assured, retirement will come.
- 5) Here’s the big one: live on less than you make. Fight the urge to purchase the new car! At least for the near future.
I had a college professor that used to say “If you fail to plan, you are planning to fail.” It was a general statement that he would say constantly, almost every class. Guess what? He’s right! You and only you are responsible for your financial future. Thus, the term that applies here is “financial adulting”. In a nutshell, adults devise a plan, kids do what feels good. The bottom line is this:
- 1) Avoid consumer debt.
- 2) Repeat, live on less than you make! Studies have shown that 78% of Americans live paycheck to paycheck.
- 3) Don’t try to keep up with the Jones’s. Keep a modest lifestyle. It took your parents 20 to 30 years to accumulate the “stuff’ they have. It will take “YOU” just as long.
- 4) Stay faithful to your budget.
- 5) Pay with cash if you can. “Cash is king”!
With these little tidbits, it’s my hope that you achieve the best outcome possible for your future.
Daniel Cruz and his wife Laura are Financial Peace University Coordinators. For over 10 years they have been helping people change their lives. Financial Peace University is a proven plan to pay off debt and build wealth.