What To Do After College – Part the First (How To Make Sure You Don’t Burn Through Your Paychecks)
Congratulations, the day is finally here!
You’ve toiled through countless research papers, midterms, and finals. You’ve done soul crushing work for professors you can’t stand. You’ve TA’d, RA’D, and kicked some A, and now you’re ready to jump into the real world. To be promoted from consumer to producer. To drink alcohol that couldn’t be compared to vinegar, engine coolant, or Draino. You’ve officially graduated!
And with that comes a lot of excitement, which is based on a lot of unknown factors. Where and with whom will you live? What will your commute be like? Is your suit the right color? Are you just another millennial with a “Social Media Manager” job? Does this selfie belong on your LinkedIn page, or does the sepia filter really not show off your sun-shiny personality? Oh, and the reason you should be reading this:
What am going to do with all the money I’ll be making?
Of course, this is a huge deal. You’re going from being strictly a consumer (I don’t care that you had a job at your bookstore, that you started a personal website, or that you waited tables last summer) to being someone who has to prove their worth to the world. As such, you should be compensated! The next four articles from yours truly will form a series that is going to deal with what are you going to do with that compensation…
Todays topic – How To Make Sure You Don’t Burn Through Your Paychecks!
We’ll discuss what your largest expenses are going to be, and what you can do to limit them (and how that’ll play into parts 2-4 of this series). By the end of this tale, you should have a good idea of how to make sure that you don’t go broke because of your basic expenses.
Where did all muh muhnay go?!
Yes, you’ve been in college for four years and you’ve learned to be frugal. You know when the specials are at Domino’s, when to get $3 shots at your nearest bar, and when too much Ramen is too much. However, the costs shift a little bit when you enter the big scary work force. At the end of the day, you’ll get your paycheck and it’ll be
a little shockingly less than you thought it would be (#sadface # awwww). You’re going to have to make do with what you’ve got. And here are the main places that it’s going to end up:
- Your Loan Providers accounts
- Your Landlord’s accounts (and utilities)
- Your Mouth
- Your Bahday (#itshowjohnmayersaysit)
- Your Ride
I’m going to throw a bunch of ideas at you to try to lower these costs so you can scrounge together some cash to spend on parts 2-4 of this series. These are not the end all be all, I’m not saying that you’re a failure at life if you don’t do these things, I’m not saying that even I do all these things. The goal here is to find what works for you, and use it. Oh, and if it’s going to save you a couple hundred bucks per month, then just shut the front door and do what I tell you. You’ll thank me later (stripper-grams are always acceptable, but I’ll settle for
exotic cars checks in five figures court-side tickets to the Warriors an Xbox 1 Domino’s Pizza a copy of Pride and Prejudice a promotional glass from McDonalds a gumball two thumbs up… you know what, don’t worry about it).
1st Thing To Do After College – Pay Your Loans!!!
Let’s get this question out of the way first – your loans should not be your largest expense (unless you completely ignored my advice in my last article). If you’re anything like the average American college student, then your loan should be right around $300-$400 per month (assuming an interest rate of 5%, repayment term of 10 years, and total debt of $30,000). So if you’ve found a place that costs that much to live, than either you’re living in something made of cardboard, you’re living in such proximity to illegal activities that you’ve gone from “Chuck Norris Badass” to “Completely Fucking Stupid”, or you’re simply the best negotiator I’ve known since my friend “Devan” (32 girls and counting). But I digress…
The reason your loans are your first expense is because these are going to have the most profound impact on your financial well being later on down the road. They affect your credit score, which will affect whether or not you have access to low cost credit, mortgages, car loans, etc. So you need to make sure that you get these right the first time, every time. Now, if you’re looking to lower your total cost of the loans, there are a couple things you can do. Some of these require some planning, some of them are so simple I could train a dolphin with the right whistle and enough fish.
Loan Deferrment/Forgiveness – I’m not going to go into a ton of detail here, but if you’re one of the do gooder types (which is awesome, the world needs more of you) than the government has several programs that would allow you to either wait on paying back your loans, help pay them back, or completely eradicate them. A lot of these programs involve you volunteering a lot of time (PeaceCorps, TFA, etc.) and the US Government is not going to look at your time at Goldman Sachs as public service, but it’s certainly an option worth exploring if you’re so inclined. If you really don’t know what to do after college but need to get these loans taken care of, this would be a good place to start looking.
Loan Consolidation – There’s a lot of good and bad here, so you need to be careful if this is the option your going to take. Loan consolidation is basically taking all your loans, bunching them up, and “selling” them to another lender that can offer better terms. Now, there are lots of terms that can be renegotiated, but what you’re looking for is a lower interest rate, which i essentially the “cost ” of your loan. Keep in mind that a lower payment does not necessarily mean lower terms! You don’t want to have to extend you payback period from 10 years to 20 years just to save an extra $50 per month. You’ll end up paying way more in interest. In fact, going from a 10 to 15 year term loan reduces your payment by roughly $80, but increases your total interest paid by $4,500! I’ll keep my $4,500 and lower payback term, thank you very much!
Pay More Than The Minimum Payment– This one is huge, as a very small adjustment can make a huge difference later on down the road. Any small addition you make to cutting down the principal you owe will help cut the amount of time if takes to payback your loan, and also cut the amount of interest you pay. For example, our friend with $30,000 in student loans, 5%, and a 10 year term could save 20 months on the term of the loan just by paying an extra $50 a month. This also reduces the amount of interest paid by roughly $1,500! AND IT REQUIRES NO PLANNING ON YOUR PART!!! No trying to find a company through which to consolidate, no getting malaria while your trying to build schools in Uganda, no trying to inspire inner city youth while they try to poison you with hand sanitizer in your water bottle. Just pay a little extra every month. Simple as that.
Expense Number 2 – Your Rent/Utilities
The next most important (and largest) expense is going to be your rent and your utilities. Here are some ways that I’ve very much reduced the amount of rent I’ve paid over the last couple years of me being out of school.
Move Where The Rent Is Less– Totes obvies, amiright? But there’s a lot that goes into me saying this. I’m not saying that you need to do whatever you can to lower your rent to a point that gunshots become your lullaby and the roaches are your roommates. All I’m saying is be sure that where you’re working (as in what part of the country) is conducive to your financial goals. If you’re at a loss for what do to after college, then try to at least pick somewhere where the cost of living (COL) is low! I was very lucky in that after I graduated from college, I found a job that had me relocate to the region with the lowest cost of living in the United States. With that comes pros and cons. Pros – I would be willing to bet the entire contents of my Roth IRA that it’s better funded than anyone else that I graduated with. That’s not to shame anyone, but when you move to Manhattan, pay half of $3000 per month in rent, and your salary doesn’t compare as well to the COL, then lower costs will pretty much always guarantee that you come out on top. Cons – I don’t live in the nicest apartment. It’s not a mansion. I’m not living in a “downtown” center where I can go out and get drunk Thursday-Sunday. I don’t have access to the best museums, libraries, entertainment options. But I have set myself up to retire at 50 at the latest. Besides, museums, entertainment, and drunken shenanigans are what vacations are for.
Live With Someone – I get it. You’ve lived with your parents that enforced a curfew and your dumb siblings that stole your shit, yelled at you when you were on the phone, and just generally tried to make your life miserable. You then moved to college, spent freshman year with a roommate that either wore too much leather and metal, never bathed, or was always drunk. You had your choice of roommates later, but you’re 22 (ish). You’ve now EARNED the right to live how you want! After all, what was that degree for if not to give you everything you wanted!
Except… that’s not quite how it works. And while you shouldn’t have to share showers after college, you’re more than likely going to have to live with someone. It’s an easy way to save yourself anywhere between $300-$1000 a month (requires no work on your part), you’ve been doing it for most of your life anyway (you’re used to it), and you might even make some friends while doing it (#besties).
Ask For Discounts – This one may or may not work for you, but if you ask for certain discounts, the worst thing a landlord will say is no, at which point you’re in no different position than you were before. For example, where I live a lot of apartments offer a 10% rent discount if you’re a teacher. I know some landlords of single family houses will offer discounts if you’re willing to do some upkeep on the house. Be creative, and just ASK! It can’t hurt! And a simple $25 dollars a month can be put towards your student loan payment, and suddenly your indentured servitude is cut by a year. booyah.
Mind Your Utilities – I’ll admit, this one is a little extreme, but if we’re being honest I still do this simply because I hate getting fucked out of money that I shouldn’t be paying. Very simply put, if you’re not using an appliance, you should be unplugging it, because even when you’re not using it it’s still drawing power. This is as simple as making sure when you leave for work, you unplug your phone charger, coffee maker, lamp, hair dryer/straightener (ladies), TV, whatever you can remember. Individually, these things won’t make a ton of difference. But if it’s going to save you 10% on your utilities, than THAT money can be put towards your student loan payment… wait, this sounds familiar…
Nom Nom Nommmomnomnoomonm…
This one brings me personal pain, as I hate anything between getting between me and my first love. But cutting food costs doesn’t have to be a huge inconvenience.
Buy Store Brand – Guys, my degree is in business. I get that marketing is a value add business process that’s necessary. But I’m telling you that the store brand 200 mg ibuprofen is the exact same thing as 200 mg ibuprofen that has a happy tiger on the box. Bread is bread, mustard is mustard, mouthwash is mouthwash and ibuprofen is ibuprofen. Don’t let the marketing guys work their voodoo magic on you in ways that don’t benefit you.
Wholesale – This is definitely a double edged sword. Do you want to buy EVERYTHING at CostCo or Sams Club? No. I don’t care who you are, you don’t need 50 lbs of rice, 5 lbs of salt, 10 watermelons, or half a cow. Am I saying that you should probably buy the cheapest paper towels you can find? Yep. Should you be buying meat as cheap as possible and freeze it? Yeah. Will you end up using all three containers of disinfectant wipes? You bet. Buy in bulk what makes sense, but don’t do all your shopping there. You’ll get very fat and very poor very quickly.
Don’t Shop Hungry – This has been a downfall even for the strongest among us. For Gods sake, don’t shop while your hungry. You’re not Adam Richman, this is not Man v. Food, and you cannot consume three pounds of beef without some serious consequences. All of this you know on a full belly. But you make your way up and down the isles, and all of a sudden Reese’s Peanut Butter Cups become a goddamn necessity. You become sure you can’t function without ALL THAT CHEESE!!! And you know what, you’ve had a hard week as a “Social Media Manager”, so yeah, you’re going to bake some muthafuckin’ brownies. All these thoughts inexplicably leave once you’ve eaten, so please make sure you do so before you shop. Your wallet and your waistline will thank you.
Suit Up – Not Going Broke On Clothes
I’m going to make this really easy on you guys. Your suits do not need to cost more than $400. You don’t need $75 dollar shirts. Your cufflinks don’t need to be made from elephant tusk. You’ve just graduated from college; no one expects you to be rolling into work struttin’ in your Hugo Boss suits. Make sure it looks good, that it fits right, and that you’re not breaking these rules, and you’ll be fine.
Getting Around (Town)
This eventually be a whole topic in itself, but for those of you looking to keep your costs down, here’s what you need to do after college to keep yourself in the black when it comes to transportation:
Public Transportation – If you have public transportation, use it instead of a car. We live in this wonderful sharing economy where Uber and Lyft can take you around in a car when you really need it, but if you live in a city big enough that has it’s own bus or subway system, use it. It’ll almost always be less than a car payment, and that’s not including insurance, gas, maintenance, and time wasted driving during the commute.
If you have a car, make damn sure it’s not a new car – There’s tons of literature on this that points to one very clear message: The moment you drive a new car off the lot it loses value. A lot of value. Like 10% for the first mile on the odometer. We’re young, and we can wait to put the first mile on a car (which mind you, I think is completely stupid that anyone would want to have that “privilege”. And unlike 16th century wedding arrangements, it really doesn’t matter if the car’s a virgin or if you’re the one to put on the first mile. Buy used.
If you have a car, drive it into the ground– You’re not going to get an investment return from your car. It’s simply not going to happen. So get a car that you can stand to drive for ten years, and then proceed to do just that: drive that damn thing till it’s a fashion statement for hipsters. Drive it until you feel the pity seeping out of the cars that pass you on the interstate. Not having to pay a $200-$400 car payment is shweet, so avoid doing it as long as possible.
How To Not Burn Through Your Paychecks – The Wrap Up
Alright folks, this is a great place to start cutting down costs as you start your ascent of the corporate ladder, launch that startup that’s “Facebook for duct tape enthusiasts”, or simply chill at home with your parents.
Comment below with any helpful hints/tricks you used/are using to cut costs your first year out of college, and as always…
For more tips and tricks on how to achieve your version of financial freedom, check out:
- The Seven Steps to Avoid Being a Money Moron
- The 7 Vegetarian Meals That Are Saving My Budget
- How Much Is Half A Million Dollars?
- The 10 Best Finance Books Money Can Buy
- 9 Credit Score Hacks You Must Know
- Why I Never Want To Retire
- The Laziest Way to Riches – Investing In Index Funds
- Budgeting Basics – Allocating $$$ Like A Boss
- Fuck You, Frugality
- Why A Million Budgeting Tips Will Never Be Enough
Keep trying to crack the code,
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