Without the college experience you once took for granted — dorms, prepaid meals, parental bailouts, etc. — recent graduates are left to brave the tightrope of financial responsibility without a safety net.
Post-grad life is as liberating as it is marked by destitution. For one, shortly after commencement, the burden of loan payments, bills, and daily expenses is quickly thrust upon unsuspecting 20-somethings. This, paired with the fact that entry level jobs are as rare as spotting a senior in the library, culminates in a significant disparity between financial input vs output.
According to CNBC, nearly 70 percent of recent grads were either unemployed or working in a full-time non-professional job during the summer after graduation. The older generation is quick to blame Millennial apathy, but consider the current state of job hunting: an increasingly competitive job market, which asks applicants to have work experience and an education, unfairly pigeon-holes inexperienced grads in career limbo.
You've tossed the cap, but class is still in session — here is a lesson in budgeting for recent college graduates.
Reassess Your Lifestyle
You're not in college anymore, which means evaluating your income (or lack thereof) and adjusting life's luxurious accordingly.
It might be time to pare back eating out, subscription services, and yes, sorry to say, alcohol. Here's a sobering fact: a moderate weekend at the bars can add up to a monthly cost of $500, or more, in alcohol costs alone.
It's time to take a hard look at yourself in the mirror and confront whether it's sustainable to live a college lifestyle given a recent graduate's income.
Get a Job (or Two)
It's not uncommon for graduates to carry over bad habits from college, but one pattern you can no longer afford is taking summers off. All good things must come to an end, and chief among these is lounging around during the summer.
Even if your career J-O-B is TBD, you should still fill summer hours with work where you can. This could be a temp position, part time job, freelance work, or mowing lawns like the good ol' days. Now is not the time to be prideful about your fresh-off-the-press degree — a job that pays is a good job.
When you do get a chance to enjoy some fun in the sun, you can rest assured that your checking account isn't in a drought.
Create a Budget and Stick to It
While in college, you might have gotten away with poor budgeting, but those days are over. Many students are able to skirt around an official budget by supplementing late night pizza, impulse purchases, and unplanned trips with excess student loan funds.
Unfortunately, the borrowed buck stops here.
Start by recording your regular income and comparing it to regular expenses. Segment life's expenses into necessities, luxuries, and the rest. Non-negotiable costs include rent, utilities, groceries, and debt. Only after accounting for these items can you begin stretching your paycheck to other costs.
Limiting frivolous spending, and adhering to a strict budget, is one of the best ways to protect your income and work toward establishing savings. Which brings us to our next point…
Delegate Funds to Savings
Saving isn't fun — there is really no way around it. Parting with hard-earned income can feel like pulling teeth. But, while it might sound cliche, you will thank yourself later. There are many practical reasons for saving money: retirement and working toward large financial goals such as buying a house are some key reasons to pinch pennies.
However, some of these milestones can seem abstract and far away when you're newly out of college. If saving seems like an activity to delay until your 30s, consider the short term benefits of saving money.
For example, in lieu of an emergency fund, extenuating circumstances must be billed to your small checking account reserve. Not only can this put a halt to long term financials goals, but can affect essential payments like rent or groceries. Planning for the unexpected, and growing an emergency savings account, helps savvy savers from the detriment of unexpected costs.
While you might not feel like it yet (or ever for that matter), you're an adult now. And being an adult means having credit.
More than ever, young people — made skittish by the Great Recession of their formative years — are opting out of debt. Millenials are avoiding car payments, mortgages, and even credit cards in an effort to "live within their means." While, this might sound like responsible budgeting at first blush, there are actually serious drawbacks to avoiding credit that become especially apparent later in life.
What this generation fails to recognize is that credit is an important indicator of financial responsibility that is used for many purposes. Want to take out an auto loan? You need credit. Want to rent an apartment? You need credit. What about getting a job? Even then, sometimes, your credit score is queried.
Here's what this all amounts to: without credit, you significantly limit your mobility as a consumer. In the event you want to graduate from a small apartment to a small house, you need a long-standing record of on-time loan payments in order to receive mortgage approval.
Start small — get a credit card with a small limit and pay it off each month. From there, work up to a small personal loan. Car loans are popular, safe lending that can be used as a stepping stone to better credit.
Incrementally, you will increase your credit score and better establish yourself as a viable borrower. Improving credit scores will be a lifelong journey, and as a recent graduate you're in an especially advantageous position. At best you have a positive history of on-time student loan or credit card payments. At worst, you have no credit. Either way, there is room for improvement, which is a great spot to be in.
If you want to know more about your own credit standing, check your three credit reports for free once a year. Get your free Credit Report Card from Credit.com — an easy-to-understand breakdown of your credit report information.