Graduating from college is one of life's most thrilling events. Finishing my degree, walking the aisle and receiving a fancy document in a leather-bound case remains one of the high points of my life.
Leaving college life behind, I was ready to live life to the fullest, whatever that meant. I was so over living under campus rules, grueling classwork, never-ending papers, midterms and finals. I was ready to begin life in the real world.
Unfortunately, I still had a lot to learn about managing finances. I knew nothing, and worse — I wasn't aware that I knew nothing. What was there to know, anyway?
Sadly, I am not alone. Today's graduates are smart but generally financially ignorant. For college graduates gearing up to enter the real world, I offer the following for starting off on the right financial foot. The decisions and choices you make in the first six months after graduation have the power to set the course of your life, for good or bad.
Of course, you've been a poor starving student long enough. You deserve a new car. And certainly you need a better apartment. And some decent clothes. Oh, and who could possibly deny you a European vacation to celebrate this amazing achievement? Followed by a couple of weeks' vacation to rest and relax. You've been through so much.
You reason: Things are looking good in the employment department, you're only young once, it makes sense to do this now before you're tied down with a job, a home and kids. I could go on, but I'll stop. And you should too. Stop thinking like that!
Taking on a car loan, the obligation of a lease on an apartment or condo, climbing credit-card balances — all of that may seem innocuous, given the great job you plan to land somewhere, somehow. And that will backfire on you. Instead of launching you into the real world, it will send you into a downward spiral that collides with unpaid student debt, negatively impacting your life for many years to come.
Stop, Drop and Roll. You learned it in elementary school for fire drills. Now apply it to your financial life. If anyone offers you a contract to sign — for a car, an apartment, a credit card or other legal obligation — stop! Drop the pen and then roll out of there fast.
Keep Driving Your Clunker. Move home. Whatever it takes, do not create any new debt during these critical six months, and possibly much longer. Take a job, any job. You need cash flow, so take the first job you can get. Then keep looking. Perhaps you've heard the term "stepping-stone"? There is nothing wrong with this. Keep your eye on the goal and get to work reaching it. Stop whining and feeling sorry for yourself.
Make Payments. You need to immediately begin paying back your student loans. Do not luxuriate in the six-month grace period. That is not some kind of gift. Interest is accruing every day (unless you have subsidized loans, which almost no one has these days). That means every day your debt is growing because the interest you owe — but are not paying — is being added to your principal balance. Next month you will pay interest on that interest, too. Ever heard the word "compounding"? Bingo.
Auto-Save. Even though in debt, you need to save money. You cannot continue to live on credit. I am a big fan of any kind of auto-pay or auto-save. When you set this up, you eliminate the need to make a decision every payday. "Should I save money this week or go to a movie?" "Should I save this week or get those really cute shoes that are finally on sale?" If you have to make that same decision over and over, pretty soon you won't. You'll get lazy, you'll stop saving and just keep spending. But if you are auto-saving even $25 a week, you've eliminated that irritating decision. You're on autopilot and that's a nice way to roll.
Soon, you won't miss the money. It will be out of sight, out of mind. I cannot stress just how important this is. If you master this concept and turn it into a lifelong habit, you will be thousands of miles (and dollars) ahead of your peers.
Please accept my heartfelt congratulations on a job well done! You have reached an important goal. I wish you the best of everything in your career and please let me know when you make that last student loan payment. Create a payment plan to do it in five years or less. Then just do it. Get it done!
Mary invites questions, comments and tips at [email protected], or c/o Everyday Cheapskate, 12340 Seal Beach Blvd., Suite B-416, Seal Beach, CA 90740. This column will answer questions of general interest, but letters cannot be answered individually. Mary Hunt is the founder of www.DebtProofLiving.com, a personal finance member website and the author of "Debt-Proof Living," released in 2014. To find out more about Mary and read her past columns, please visit the Creators Syndicate Web page at www.creators.com.