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Anya Kamenetz Generation Debt

Anya Kamenetz, Generation Debt

Real-World Advice for Fresh College Grads

by Anya Kamenetz

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Posted on Monday, May 19, 2008, 12:00AM

Congratulations, college class of 2008! You've earned your diplomas. Now it's time to get smart about the real world.

Current projections say the job outlook for the class of 2008 isn't bad but it's not great either -- there is an increase in hiring compared to last year, but it's half of what was projected in the fall, and salary growth is mixed as well.

The bad news: Research shows graduating into a recession has the potential to negatively affect your earnings in the long term.

The good news: Surviving and thriving in an economic downturn boils down to managing your expectations and your finances wisely, which is a lesson with a lifetime's worth of value. Here are some areas to concentrate on.

Find Housing You Can Really Afford

The "New York Times" did a piece recently on finding your first New York City apartment.

One of the men they profiled is a consultant who chooses to pay more than half of his after-tax income for an apartment in Manhattan. Despite the fact that his income (combined with a roommate's) satisfies the landlord, he is not showing good financial sense. You shouldn't spend more than 30 percent of your income on rent. If you need to split the rent eight ways, then do it. When you're young, living with lots of roommates can be a rite of passage, not to mention a fun way to get to know people and have a home base in a big city.

Or try starting out in a not-so-big city. The most affordable rents, not surprisingly, are in states such as Kansas, Oklahoma, and Kentucky.

Take Care of Your Health

Young people are the largest and fastest-growing group in the country without health insurance. That must be why I've been invited to several benefit parties for twenty- and thirtysomethings who have unexpected medical expenses that they can't afford to pay for.

Doctor's bills are bad for your wealth as well as your health -- they're a leading cause of bankruptcy and credit card debt.

So if you don't have health insurance through your job -- or if you're still looking for a job -- here are a few options:

- In 30 states, you may be eligible for coverage under your parents' plan as part of a family rate, up to your mid 20s (in New Jersey, the limit is age 30). Find out more here.

- You may also be eligible for low-cost coverage under a state or local plan for low-income adults, such as Healthy New York or Healthy San Francisco. Check your state's insurance department for details.

- Consider a so-called catastrophic or major medical plan; these have the lowest monthly premiums and high deductibles, but they will pay off if the worst occurs.  

Start a Debt Freedom Campaign

Got student loans and credit card debt to pay off? One tactic that's worked for a lot of readers is to start a debt freedom blog. Use an online calculator to figure out a date by which you want to be debt free, and a realistic monthly sum to save -- say, $50 -- that will get you there. Then, post about your progress as a way of keeping yourself to that promise.

See this personal finance blog aggregator for lots of great suggestions and models for your blog.

Get Rewards for Saving and Budgeting Online

Personal finance sites marketed to GenDebt are growing every day, and anything that starts the saving habit is a good idea.

At Billeo.com, you can build your credit score by simply paying bills. SmartyPig.com, a startup, offers retail rewards and a relatively high interest rate for saving online, with a fun, social format; Wachovia's Way2Save and the site whatareyousavingfor.com, sponsored by a credit union in North Carolina, offer similar savings rewards.

Consider a Hot or Green Career

Education and health services top the list of employment sectors with the biggest and fastest growth, and with significant public spending in these areas, they'll still be hiring, even in a shrinking economy.

"Green jobs" are another broad area where I see big opportunities. The UN reported that the environmental industry created 5.3 million jobs in 2005.

Green jobs range widely -- from scientists developing renewable energy technologies, to engineers, lawyers, green architects and designers, and even organic farmers and gardeners.

Recycling, waste management, and remediation are special growth areas, along with renewable energy. Senator Barack Obama(D-IL), for one, has proposed $150 billion in federal investments to create even more green jobs.

You can find dedicated listings of green jobs at sites such as sustainablebusiness.com, greenjobs.com, and treehugger.com. 

Be Flexible and Optimistic

An interesting nuance to the research on recession and income:  One study found that "graduating in a recession leads workers to start at smaller and lower-paying firms, and they catch up by switching jobs more frequently than those who graduate in better times."

At first, the study by the National Bureau of Economic Research
found, recession grads can take a hit in earnings of up to 9 percent compared to boom-time graduates, but those losses are made up over time by trading up more often. So while you're working hard at making yourself indispensable at your first job, don't get too comfortable. Keep an eye out for new companies, positions, and industries that might lead you toward your passion.

One last point: In the past, recessions have led to bumps in grad school enrollment because staying in school looks preferable to jumping into a dicey job market. I would urge any new grads to get a couple of years of work experience under their belts and research their field thoroughly before rushing back to school and taking on more student loans.

But whatever you do, don't stop learning new skills, developing your particular talents, and keeping an open mind about opportunities. That's what will make you indispensable -- no matter how the economy is doing.

Next week I'll answer finance questions from real new grads.

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133 Comments

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  • Yahoo! Finance User - Tuesday, June 3, 2008, 3:02PM ET  Report Abuse

    • Overall: 3/5

    These were great pointers especially about the grad school comment. I was thinking about just going to grad school so that I can be able to make more money, but college loans do have a habit of piling up, so Ithe experience is really what I need this was I can find a school that can at least hlep me fund for grad school.

  • Marshall - Friday, May 30, 2008, 7:21PM ET  Report Abuse

    • Overall: 2/5

    dpscll: Pessimistic much? The mythos of the American Dream is that we can achieve anything we want through hard work. No where is it written that we are entitled to anything that, for some reason, we now perceive as a inalienable rights. Also, what are you basing your standard of living on, and what exactly are you comparing it to? By almost any standards, our generation's standard of living easily suprasses that of our parents, and is easily much better than in many other cultures in the world. Consumption is what a big part of our current economic model is built on, so I sincerely doubt that the "era" is over. And greed? Please. Even the stalwarts of financial decency are greedy. To everyone complaining about the journalistic value of the article: Please, it's Yahoo! Finance, not WSJ. They're fluff pieces geared towards people that don't carry an economics book under one arm, and a copy of Kiplinger's under the other. Lighten up.

  • Mike - Tuesday, May 27, 2008, 10:55AM ET  Report Abuse

    • Overall: 2/5

    I would hope most college graduates would know these pointers. They aren't exactly rocket science.

  • jec97t - Tuesday, May 27, 2008, 9:59AM ET  Report Abuse

    • Overall: 1/5

    Decent info but an original thought would be nice...

  • Alex - Monday, May 26, 2008, 1:09PM ET  Report Abuse

    • Overall: 3/5

    Many commentors seem very angry over Anya's article, but I cannot see why you folks are so upset. "Iron my shirt" is hardly a well thought critique, nor does it deliver insight into the supposed shortcomings of the article. As for the poster who complained about Anya rehashing other information- have you ever watched the news? Most news info is taken from other sources before reaching the audience. You people ever heard of the AP newswire? However, I am open to new ideas, so feel free to be constructive and suggest another author...

  • Lee - Sunday, May 25, 2008, 9:38AM ET  Report Abuse

    • Overall: 1/5

    Why don't you tell them the real truth - the American Dream as their parents knew it will never be theirs - the standard of living for them will be less than half of what their parents had. TRUTH - the era of consumption and greed is over for this country.

  • John - Saturday, May 24, 2008, 9:38PM ET  Report Abuse

    • Overall: 1/5

    Pretty face? Are you kidding? The problem with these financial journalists is that they recycel the same information. I guess they are unaware of some of the "REAL" financial hardships that americans are going through. As for college grads, good luck in getting a job and buying a house with you $30,000 loan debts

  • DaveR - Friday, May 23, 2008, 5:02PM ET  Report Abuse

    • Overall: 2/5

    Here is some advice Anya. IRON MY SHIRT!

  • Doreen - Thursday, May 22, 2008, 10:43PM ET  Report Abuse

    • Overall: 1/5

    She rehashes every column from other sources. If you don't have anything new to say, go away.

  • Yahoo! Finance User - Thursday, May 22, 2008, 5:55PM ET  Report Abuse

    • Overall: 5/5

    I liked Anya's ideas, and people would in general find more financial success if they listened to the spirit of her article and took it to heart. While the standard banker's 30% of income on housing may seem impossible in high-cost areas, listen to the underlying idea that maybe consider a different area - and if your career is limited to that area, and your choice of career forces you to spend half of your hard-earned cash on rent, then...maybe you should think about doing something else, as well as living somewhere else. Amen to the commenter who said it's good advice for younger people in or just out of college, not for middle-aged corporate drones with an axe to grind.

  • Yahoo! Finance User - Thursday, May 22, 2008, 4:32PM ET  Report Abuse

    • Overall: 4/5

    Without the pretty face at the top of the page, would this writer have gotten the job at YahooFinance?

  • John D - Thursday, May 22, 2008, 4:28PM ET  Report Abuse

    • Overall: 1/5

    "Doctor's bills are bad for your wealth as well as your health -- they're a leading cause of bankruptcy and credit card debt." Maybe bancruptcy, but not credit card debt. You can't be forced into credit card debt. You choose to go into credit card debt.

  • tonyl - Thursday, May 22, 2008, 2:34PM ET  Report Abuse

    • Overall: 5/5

    thanks captain obvious.

  • mike - Thursday, May 22, 2008, 9:59AM ET  Report Abuse

    • Overall: 1/5

    Useless

  • Eric J - Wednesday, May 21, 2008, 6:37PM ET  Report Abuse

    • Overall: 5/5

    Good advice for kids without common sense

  • Yahoo! Finance User - Wednesday, May 21, 2008, 6:06PM ET  Report Abuse

    • Overall: 2/5

    The most important key to a good living has always been and will always be HARD WORK. There are ways to try to make it without working for it but those are gamcbles with your future. Take it for this High School graduate who make a 6 figure salary, college doesn't guarantee anything and likewise no college doesn't guarantee anything either. Work hard, be responsible and life will be good. People who EXPECT things just because of this or that deserve nothing. "Welcome to the Jungle c/o 2008" ... that's classic!

  • Yahoo! Finance User - Wednesday, May 21, 2008, 5:04PM ET  Report Abuse

    • Overall: 1/5

    No, this is obvious to those of us who are 22 as well. Kansas??? Seriously? My "recent grad" finance question... Who would want to spend four years of their life working towards a degree and try to go work in Kansas netting some ridiculously short salary? I don't care how low your rent is, you can't pay off loans like that.

  • Yahoo! Finance User - Wednesday, May 21, 2008, 1:18PM ET  Report Abuse

    • Overall: 3/5

    I say, let the kids figure it out for themselves. Anyone who doesn't understand that you have to live within your means deserves to feel the consequences for not doing so. I have sympathy for people with legitimate obstacles, but truly, most people should start laying the blame for their problems at their own feet. If you want a high-paying job, get a useful degree. Don't get a B.A. in Underwater Basket Weaving (rather than naming a real degree that I feel is mostly worthless) and expect someone to pay you 100K/yr just because you went to college! Remember, this is America...chances are, you won't starve to death. You might have to live in an area you don't like or do a job you hate, but if you spent your college years partying and learning an unimportant skillset, well, survival of the fittest owns you. Welcome to the Jungle, c/o 2008.

  • Kathern - Wednesday, May 21, 2008, 1:04PM ET  Report Abuse

    • Overall: 2/5

    I disagree with the advice to wait off to go to grad school. If one were to pick thier undergraduate school wisely, they would only graduate with subsidised loans that do not need to be paid off until one is entirely done with graduate school. ALso, due to the increased economic responsiblities of rent, one's own health insurance, and a car, it would become difficult to financially support oneself if one were to leave college to work until one is fortysomething with expendable income.

  • Yahoo! Finance User - Wednesday, May 21, 2008, 11:59AM ET  Report Abuse

    • Overall: 4/5

    I rated the column four stars because it's good advice directed at recent college grads-not middle age middle managers with an axe to grind. Also, I wanted to respond to the following comment, "For most people, trying to learn new skills costs money...Secondly, if you don't have at least a 4 year degree, you are NOT going anywhere, and basically are equivalent to most of the people behind a counter at a fast food restaurant. An MBA is necessary to really make it these days." I disagree completely and totally with the above statement. It is not necessary to take on debt to learn new skills, it does not require a professor lecturing to learn new skills and the lack of a college degree does not mean the counter person at the local fast food joint is less of a person than someone with a degree. I advanced my career while working towards my BA and was able to learn those "new skills" without taking on debt, through the use of scholarships, savings and tuition reimbursement. I work alongside numerous people who are not college graduates and still manage to hold down white collar jobs paying above average salaries in the NYC metro area. A BA or MBA is not necessary to "make it" in the world today. A good work ethic and common sense about living within one's means goes along way toward "making it" in the world today.

  • d - Wednesday, May 21, 2008, 11:58AM ET  Report Abuse

    • Overall: 3/5

    She does have some good points. People are so quit to dismiss living in the Midwest in a not-so-highly congested area (that is, not living in Minneapolis, Chicago, etc.). A poster a couple down is saying Anya is talking about a different world because that poster is in California where gas is over $4 and eggs are over $4 (which I seriously question that validity). So yeah, those jobs HAVE to pay more. People saying we pay less here in the Midwest (I live in N Dakota) are right, but I don't pay over $3.70 a gallon right now, and eggs are under $2 a dozen. I have no tolls. I reach from one end of the city to the other in under 10 minutes (meaning I can get a job anywhere in the city within 10 miles of my home, or within 20 miles if I go to the neighboring city),and I currently live a 12 minute bike ride from this work (only going there because it's uphill, 5 minutes coming home downhill). I spend $530 between my lot rent and my mortgage for my nice (not great) mobile home which is 3 bed, 2 bath, and after another 22 months, my only housing expesne is $250 a month lot rent. I don't need a $80,000 job. I only need about about $24,000 a year to have most everything I want, and that type of job is easily obtainable if you actually have any decent work ethic (which Ben's already commented on). So yes, Anya IS talking about a different world, but people DO in fact live in that world. So maybe it's worth it for some people to check out what she's talking about with living in a smaller city or area.

  • William - Wednesday, May 21, 2008, 11:33AM ET  Report Abuse

    • Overall: 1/5

    How can peopel write a page and not say anything useful? I wish I was that good.

  • Amy Bivalent - Wednesday, May 21, 2008, 10:55AM ET  Report Abuse

    • Overall: 2/5

    Unfortunately when you have student loans to pay, you can't afford to be "flexible" with employment. If you're a recent grad. and want to buy a house within the next 5 years "trading up" for better jobs isn't the best idea. When buying your first home, it doesn't look good to lenders if you change jobs every year or two even if your credit is perfect. (Trust me on this one, I've been there!) After sucking it up and working at a job I absolutely detested just long enough to get decent work history and minimal tuition reimbursement toward my MBA, I'm convinced that this time when I graduate I'll be better off working for myself. I agree with what others have said about 30% of income on housing being unrealistic. When I was working my lousy (but decently paying) corporate job, I purchased a home that was within the 30% budgetary constraint but it was what most people would consider barely habitable (ie, total handyman special, not the best neighborhood). So, I would definitely advise that if you're not handy, willing and able to tackle a massive money pit & live with roommates, it may be a better idea to suck it up and spend up to 50% of your income on decent housing, especially if you're buying to live in it for the long term or have a family with young kids. For now I'm enjoying my summer term off of Grad. school by working the 3 jobs I now need to pay the mortgage and buy groceries. (Luckily for me, I have less than a 5 mile commute and live on the busline or I'd be complaining about the gas prices too!)

  • Yahoo! Finance User - Wednesday, May 21, 2008, 10:23AM ET  Report Abuse

    • Overall: 1/5

    Anya is correct, she gives good advices...... However, the truth is somewhat different...... We pay Federal Income tax, State income tax, City also asks for money, Social Security, Medicare, State Disability, Workersman's comp, etc. directly from our pay check.......... We also have huge mortgage loan, student loans, medical insurance, car insurance, home insurance, property taxes, bills, bills, and more bills, there are more bills than you can think of....... The gas price around the corner of my house is $4.19 in California, I went to Safeway and I can not believe, a dozen of eggs is $4.69, a gallon of milk is more than $4.00, Just drive over a bridge is $4.00, they are talking about $5.00, someone even talking about $7.00....... A lousy over crowded bus ride is $1.50, and they are talking about increase to $2.00, one public transportation ride on BART from Fremont to Airport is $7.45, they are talking about increasing that too...... There is no money left to do anything......... A two bedroom apartment is almost $2,000 per month, it needs to be shared by 4 persons to afford that, a decent job is so hard to find...... But, Anya is talking about something in a different world......

  • Joel - Wednesday, May 21, 2008, 9:54AM ET  Report Abuse

    • Overall: 5/5

    Great article! Too bad "common sense" like this is all too uuncommon, but great to hear it being put forth as the real answer to financial well-being instead of gimmicks or whining.

  • Yahoo! Finance User - Wednesday, May 21, 2008, 9:10AM ET  Report Abuse

    • Overall: 1/5

    The unfortunate truth is that in New York, one must pay a substantially larger portion of take-home in rent than in other cities. Saying that one should only spend 30% may hold up in other cities, but certainly not in New York. And saying "move somewhere" isn't always an option--many industries are based primarily out of the New York market, and one may not have a choice but to live there.

  • Dan - Wednesday, May 21, 2008, 9:02AM ET  Report Abuse

    • Overall: 1/5

    First, Anya doesn't have a clue of what is really going on. For most people, trying to learn new skills costs money, and with the current credit crunch, if you have a student loan now, you probably ARE NOT going to be able to borrow more. Secondly, if you don't have at least a 4 year degree, you are NOT going anywhere, and basically are equivalent to most of the people behind a counter at a fast food restaurant. An MBA is necessary to really make it these days. Financing it is a pipedream for most. Secondly to use Barack Obama as a reference (even as I am a Democrat), is a joke. His elitist rants really do nothing for the young people, but like a bunch of lemmings they flock to the man. I guess it doesn't take much, which probably equates to the situation we are in as a country, and the state of higher education. For ANY college graduate in the past 5 years to really make it in this economy, it takes hard work, and alot of prayers, because opportunity doesn't knock much lately (unless you got tons of dispensable income and you are buying options on oil..), and the raises are too little and FAR BETWEEN. Also, the margin for error.....is NON EXISTENT. Basically put, if you followed FORMER Yahoo columnist Penelope Trunk, you are heading for an eventual train wreck in your new career. So don't blow it. As for Anya, remember (like mutual funds) past performance (or options expressed) are not indicative actual performance (or real world expectations), and that what you face in this world could be A WHOLE LOT tougher than Anya says. Sorry to be give out the pessimism, but better to see the world/economy for what it is, and not to hope for what it isn't!

  • Yahoo! Finance User - Wednesday, May 21, 2008, 7:49AM ET  Report Abuse

    • Overall: 1/5

    Spoken like the true socialist that she is. In addition to all the "green" jobs Obama would create, maybe we could get the government to pay for everyone's school too. That way nobody has any debt and the world will be one big happy Obama place.....

  • ChheangY - Wednesday, May 21, 2008, 7:41AM ET  Report Abuse

    • Overall: 2/5

    What a monkey... how about offering something that's not common sense?

  • Yahoo! Finance User - Tuesday, May 20, 2008, 11:06PM ET  Report Abuse

    • Overall: 4/5

    It's not that bad...

Showing comments 6-35 of 133<< PreviousNext >>

More from Anya Kamenetz

Read the Generation Debt Book

According to economics professor Laurence J. Kotlikoff, Generation Debt offers "a truly gripping account of how young Americans are being ground down by low wages, high taxes, huge student loans, sky-high housing prices, not to mention the impending retirement of their baby boomer parents." Generation Debt will inspire you to take charge of your financial future.

Read more from Anya Kamenetz here and here.

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