How Much Money Should You Budget For After College
For most college kids, “the real world” is the last thing they want to think about.
Between getting a job, finding a place to live, starting to pay bills, and even making a new circle of friends, it's no wonder people just want to coast by until graduation. However, doing so can cost you significantly in the long run.
With how competitive the job market is after school, planning ahead financially can help you out tremendously. Not only could it possibly mean not having to make the trek home to live with mom and dad, but it can also open up more doors for your career. While I know it might mean sacrificing some fun while you're young, it will be well worth it in the long-run. Here's why:
It Starts Before You Cross The Stage
While a lot of times saving money is considered something so minuscule that it's not going to make an impact, that perspective can hurt you quite a bit. Even just setting aside $100 from a part time job here and there can make a world of difference, providing you with a safety net for an opportunity after graduation. Furthermore, your savings are going to provide more financial freedom with your credit score, which is going to be the cursor to how you'll be able to handle money in the future.
As Lexington Law- a credit repair firm notes, college is one of the amplest times you have in building up your credit. This can include taking out a secured credit card, which is a line of credit you put a deposit down on and borrow from. Because it's secured, you can virtually never be in default or past due on your card, creating a safe bet for you to build credit off of. Additionally, while a secured card is just one example of a solution to building credit while in school, some other options include reporting your rent, putting shared utilities in your name, and even starting to pay your student loans if you can afford it.
The steps you're going to take in college are going to be some of the most beneficial in providing yourself with a sound future after graduation, which can be much tougher than you'd imagine.
What The Real World Will Be Like
Perhaps one of the hardest parts about getting a job out of school is the waiting game for a solid job. According to Pew Research, 44% of college graduates in 2012 were “underemployed,” meaning they were working jobs that didn't require a college degree. If anything, this should let you know that looking for your ideal position is going to be tough, and even with savings, you might have to factor in a full-time or part-time job to make ends meet. Also, if you are lucky enough to land a job out of school in your field, don't assume your position will be within what's considered the national average.
In a survey conducted by the National Association of College and Employers, the average salary out of school in 2016 was $50,556. For a lot of us, this sounds exactly like what we were promised when going to school, but don't get your hopes up. As an average, this is pulling from those with highly-specialized degrees such as Engineering or from schools with broad networks (I.E.: Graduating from Harvard with an Economics degree versus a less notable school). In short, these folks are going to be making close to six figures out of school, which throws this number off. Play it safe and make your expectations around the $30,000-$35,000 range, while aiming to make much more. And remember, not everything has to come to you right out of the gate, so stay patient.
A Patient Person's Game
In formulating your post-grad financial picture, divide up your bills between long-term debts, short-term debts, and monthly expenses. Your monthly expenses are going to be things like rent, your phone bill, utilities, etc., while short-term debts are credit cards or loans to be paid back within 3-6 months (I.E.: for major expenses). Finally, your long-term expenses fall under things like student loans or car payments. Set aside a healthy budget for each (plus savings) to start painting a picture.
On a final note, I'll say you shouldn't stress that much about debt. I know it sounds silly, but it takes most people on average 21 years to pay off their student loans, so don't think that throwing every little penny at it is going to make the biggest difference. No, remain balanced, pay what you can, and save. After all, they call it “commencement” because it's the beginning, not the end, right?