Congratulations! You graduated from college with a lot of hard work and determination. Fresh starts are always exciting and having a plan for landing a new job as well as managing your money can be two of the greatest challenges facing graduates.
In a recent discussion with Rachel Cruz, author of Love Your Life Not Theirs, she talked about how easy it is to compare your life with how other people live and how it leads to being overwhelmed with debt. With social media, you instantly become aware of how other people live their lives without much guessing as to how much things cost. (www.rachelcruze.com/book)
In her book, she offers straightforward advice on how to get out of debt and manage your money in a way that will boost your confidence now and in the future. No doubt, Rachel is on a mission to help those facing debt learn how to shop wisely, develop self-awareness, and plan to live a life with good money habits without the burden of debt. The truth is you worked very hard to get where you are today and tackling your behavior with money early on helps you get the life you want and achieve your goals.
In today’s marketplace, most graduates start life out of school with a bucket load of debt while seeking a job to help pay for it. The sneaky thing about money is that it can affect your career choices as well as influence the way you make decisions and learning how to curb your spending habits early on leads to a happy life.
Most students that I know would rather land a job that matches their interests rather than take anything that comes along to survive. Managing money can be the most important lesson of them all when starting your life after graduation, here are some practical tips Rachel shared with me to help you get a grip on debt.
- Make a budget. Telling your money what to do is really the primary job of a budget even though most think of a budget for tracking monthly expenses. It really boils down to intentional spending, being proactive instead of reactive. Here is an app to help you create a budget: www.everydollar.com.
- Emergency fund. Set aside $1,000 for an emergency fund because you will have one, such as needing to buy new tires and all those unplanned and unexpected expenses. Before you start paying down debt, establish an emergency fund first.
- Debt snowball. Start by paying the smallest amount owed to the largest regardless of the interest rates, concentrate on paying off the smallest amount. Once that’s paid off take what you were paying and roll it to the next smallest amount and so on until you are debt free. (www.daveramsey.com/blog/get-out-of-debt-with-the-debt-snowball-plan/)
- Financing happiness. It’s super easy to start comparing your lifestyle with others especially on when you see your friends and connections living life large on Facebook buying new cars, taking expensive vacations and constantly eating out. Too many people confuse fun with happiness, you can buy fun but you can’t buy happiness. Happiness is hanging out with friends, having a nice dinner with your spouse and creating special memories that are priceless.
- Look at your needs vs. wants. Spending money always comes down to needs and wants. The basic needs are shelter, food, utilities, clothes and transportation. The wants are online streaming services, cable, fantasy football leagues and of course holiday costumes for your dog.
Take a closer look at the blurred line between needs and wants and how they tend to create debt such as you need a car but do you need a brand new one? As soon as you identify and separate the needs and wants you’ll be on your way to making better decisions.
- Eating out. When you are in the middle of a job search or working non-stop, eating out can be convenient as well as a boost to your spirit. There’s no problem with eating out, just be mindful that convenience adds up.
Rachel gave a good perspective on eating out that makes you stop and think — you would be lucky to eat at a restaurant for under $50, do that twice a week and you’ll spend $400 a month. If you make the average household income of $50,000 that equals to 10 percent of your income on restaurants alone. It helps you look at convenience in a different way.
- Student loans. Unfortunately most graduate with debt, but plan to start paying the loans back as quickly as you can by not settling for making just the minimum payment, rather double up or triple your payment as soon as possible.
The most important thing to remember is that no matter where you are in life, whether you are just graduating or facing retirement, it’s never too late to take control of your money and learn new habits.
The challenging part for most is changing behaviors, but take a few of these suggestions to heart and start small by applying them one step at a time. You’ll be amazed by the way you feel.