Advice for the Graduate

Posted: Updated:

It's graduation season - a time to celebrate accomplishments and plan for the future!  What financial advice does a young person need when beginning the next chapter of his/her life’s story?  Especially the ones who may not track their Uber rides and Amazon purchases!

This is the time that college graduates and others who are transitioning to work say good-bye to the "sheltered" life and hello "real world."  If that’s you, are you ready to make the tough financial decisions?  If it’s someone you know, consider passing this along to them.

Be Responsible for Yourself

For many new graduates, this will be the first time they are required to be totally responsible for themselves.  Making good choices now may mean the difference between always struggling with finances and gaining a secure financial future.  Being financially literate, understanding the cost of debt, and learning to enjoy a lifestyle within your means are all key to successful management of your financial life.

You graduate from college and immediately get submerged in money issues.  How much should I expect to make in my first job?  What can I afford to spend on an apartment?  Where do I purchase car insurance?  What are the consequences of not paying off the monthly credit card bill?

Here's a little guidance in all of those areas to help you get started on the right foot.

The Key to Budgeting: "Limitize"

Forget “supersize” and focus on "limitize"!  This means limiting spending to the amount you can afford.  Receiving a full-time salary, may cause an immediate feeling of wealth followed by the idea that there is now plenty of money to spend on all those items sacrificed while in college.  Take the time now to design the spending plan that matches your income.

Start by determining the cost-of-living for the locale where you will be working. If it is higher relative to where you grew up or attended college, be sure to focus on the higher prices for the necessities.  Search on the Internet for average spending numbers and start building a budget using these percentages as a guide.  Determine your fixed expenses, which are those items that will consume a part of the paycheck every month, such as rent, utilities, student loan payments, transportation costs, and other work related expenses. 

Be aware that entertainment is not part of the fixed expenses!  Dining out, DoorDash, Uber rides, Netflix, iTunes, online shopping, clothes, hair cuts, and socializing with friends at your neighborhood brewery are all variable expenses.  Only money left after paying the fixed obligations can be spent on these items.  The better you become at managing and controlling the fixed expenses, the more money left for the variable spending!

Start Saving Now

The farthest thought from your mind is likely to start saving and investing.  However, with your first paycheck, you need to get into the "saving habit."  The amount saved isn’t as important as starting now and continuing throughout your career.  When creating your budget, think of this regular saving as “paying yourself first” to secure your future.

Debt Management

Taking on too much debt is the greatest hindrance to financial security.  Some debt, such as education and car loans, may be unavoidable. School loans for which payments were deferred during your college years will soon require a monthly payment.  Education loan consolidation may be helpful to establish a reasonable payment over a set period of time.

To purchase a car, most new graduates will likely need a car loan. The cost of buying now and paying later is the interest rate.  Whenever you borrow money, always calculate the total dollars going out to pay the loan interest.  You will quickly understand how important it is to make good decisions regarding what you can afford and to shop for the best loan rate!

The curse of money management is credit card debt.  Credit cards can be a terrific money management tool if used appropriately – that means paying off the outstanding balance each month.  Allowing a balance to accumulate on the credit card at an interest rate of 18% to 21% can create a black hole that is very difficult, if not impossible, to pull out of.  Generally, credit card debt is created to fund a lifestyle that cannot be sustained by your income level.  A prolonged strategy of "buy today and pay tomorrow" will lead you to quick financial ruin.  Avoid falling into this deadly financial trap!

Summary

Get your new life started on a solid financial foundation!  Make good spending decisions and always plan to save money for future necessities as well as eventual retirement.  Keeping your debt and credit card usage under control will lead to a financial life with less stress and disappointment.

Evan D. Bedel, CFP, is a Financial Planner and heads Generation NeXt services for Bedel Financial Consulting, Inc., a wealth management firm located in Indianapolis. For more information, visit the Bedel Financial website at or email Evan.

  • Perspectives

    • Hope is Not a Plan

      This is sobering. A local business broker in Indianapolis reports nine out of 10 business owners who want to sell are turned away. Of the one in 10 that does make it past the first analysis to sell, over half of those company owners don’t get the sale price they hope for or believe the business is worth. Bottom line, hope is not a plan if you want to sell your business.

    More

Subscribe

Name:
Company Name:
Email:
Confirm Email:
HTML
INside Edge
Morning Briefing
BigWigs & New Gigs
Life Sciences Indiana
Indiana Connections
INPower
Subscribe
Unsubscribe

Events



  • Most Popular Stories

    • Brooke's Candy Refocuses, Will Close Terre Haute Shop

      Dana-based Brooke's Candy Co. says it will close its downtown Terre Haute retail shop June 1. The location opened less than two years ago and is the company's second storefront. In a message on Facebook, Brooke's Candy Co. says the decision will allow it to focus on the Brooke's Naturals line, which includes cookie, brownie, cake and bread mixes. The company calls it a tough decision, saying...

    • Angela Smith Grossman

      DCS Appoints Assistant Deputy Director

      The Indiana Department of Child Services has promoted Angela Smith Grossman to assistant deputy director of field operations, a new position that will focus on enhancing the agency’s foster and collaborative care programs. She has been with DCS for more than 27 years. During her tenure with DCS, Smith Grossman served as a regional manager, local office director and family case manager supervisor.  

    • (photo courtesy of Wilson St. Pierre Funeral Home)

      Chateau Thomas Winery Owner Dies

      The owner and president of Chateau Thomas Winery in Plainfield has died. Charles Thomas, a longtime OB-GYN who practiced for more than 30 years, founded the winery in 1984 along with his wife, Jill. He was 86.

    • Picture Courtesy: Indianapolis Airport Authority

      Indy Airport Among 'World's Best Domestic Airports'

      Travel + Leisure Magazine has named Indianapolis International Airport one of readers' favorite domestic airports in the world. The airport landed the second spot on the magazine’s 2019 World’s Best Awards. .

    • (Provided Photo/Indianapolis Zoo)

      Top Nature Group to Locate Global Center in Indianapolis

      Indianapolis Zoo President Dr. Rob Shumaker has signed an agreement with the world’s largest and most important environmental conservation organization to locate a first of its kind global center in Indianapolis. The agreement with the International Union for the Conservation of Nature creates the first Global Center for Species Survival, which will support an estimated 9,000 experts and scientists around the world and make Indianapolis a hub for...