If you’re a senior graduating from college, you might feel a little different about graduating right now than you did a few months ago. Yeah, about that global pandemic…you don’t know what your job prospects look like, and that means you don’t know what your MONEY looks like. And hence stems the existential dread spiral (is your brain familiar with this one?).
Hold up: there are some things still in your control when it comes to your personal finances, and we’re here to tell you some rock-solid principles that will guide your financial health no matter what your paycheck looks like.
1. Being Young and Broke Has Its Upsides
For recent college grads, it is completely normal and socially acceptable to live in a shoebox and live on rice and beans. Use this to your advantage! Play your cards right and fully embrace this societal freedom to live super cheaply. Sure, you can do this later in life too but it’s just so much easier fresh out of college. Once you start getting paychecks and a larger inflow of cash, you’ll be all sorts of tempted to keep up with the Joneses, but for now: you just focus on keeping your living expenses low and saving more now.
Which brings us to the next point…
2. It’s Ok to Move in With Parents
Yeah, some love to hate on this little piece of advice, but it’s just a reality, and extra OK during these strange times. If you like your parents and you don’t have a job lined up, this is often your most cost-effective choice (or maybe your only choice). Make the most of it, find some side hustles or hourly jobs, and stash that cash while you can.
3. You Can Control Money, or It Can Control You
Here at YNAB, we see this all the time. People that make very little money can have total control, and some people with huge incomes feel wildly out of control with their money. It doesn’t matter what your salary is (or lack thereof): if you’re responsible with a little bit of money, you will be responsible with a lot of money. Build good habits now and they’ll carry through when you’ve had years of paychecks flowing in.
So how do you have control over money? We’ll get to that.
4. Join the Rager Over Student Loan Debt
College is expensive and borrowed money needs to be paid back. Of those that borrowed money for college, the average student graduates with roughly $30,000 of student loan debt. That means paying about $300 each and every month for the next 10 years. That’s $300 a month of your money that can’t go to groceries, dinners on rooftop decks, saving for a house, and saving for retirement—it’s locked up in paying back your debt. Whew, talk about ripping off the bandaid!
You can choose to tackle your student loan debt in an all-out sprint, or you can chip away at it slowly and steadily. The good news: this debt won’t hang around forever. Whatever you choose to do, a budget will help you supercharge your debt payoff. More on that soon.
5. Confidence with Money is Learned, Not Born
If you’ve already labeled yourself “bad with money,” “terrible with money,” I’ll never understand money,”—well pick up your chin and buckle those bootstraps. Being good with money isn’t this intrinsic natural talent: financial savvy is about learning, not about knowing everything. And you just graduated! You know how to learn! You can do this, and now is the time to start figuring it out.
Want to start with a book? You’re good at books! Check out this one by our CEO Jesse Mecham. It’s packed with stories, including his own post-college years, and is a surprising page-turner (how many other personal finance books can you say that about?). You will feel zero judgment, and you’ll start to see money in a whole new light.
6. Life is Expensive
When you chose your major, it was probably more about your Enneagram type and whatever subject you excelled at in school, mixed in with a couple google searches of “what major makes the most money” and off you went.
But here’s a reality: do you know what the average starting salary is for a person with your major? $30k? $50k? $70k? Whatever it is, it’s going to seem like a million dollars at first. When my husband (a business major) got his first job offer with a car company, they told him his salary and his first thought was: “Oh, now I can buy a Porsche!” (spoiler alert, he did not buy a Porsche).
Life is expensive! Especially when you’re first starting out, you just don’t have a lot of things. You might need a new car (that’s a few thousand dollars), you might move to a different city (there goes a few more thousand dollars), you might rent and apartment (first, last, and security. Ouch). Heck, you probably need a bed!
So how do you plan for those expenses and how do you know what you can afford? We’ll get to that.
7. Your Friends Determine Your Spends
The habits and lifestyles of friends you keep close in adult life will rub off on you. When we graduated, we had two circles of friends: one was a crew in grad school (read: no money coming in), and the other group had high-powered tech jobs and owned businesses (read: lots of money coming in).
When we spent time with the grad students, we could go through a weekend of potlucks, bike rides, and hanging out at the park without spending a dime. With the career crew, it was fairly normal to spend $100 in a single night for dinner.
Now both groups of friends were wonderful people: we had a great time at the park and a great time at the restaurant. But as the months went on, we gravitated more towards spending time with the grad school crew, and this had a big effect on our savings, as my husband and I were both working decent jobs with decent salaries.
Those zero-spend weekends and abundance of free fun really added up over the many years of our friendship with the grad school crew. Compound all those savings, and a few years later we had saved enough money for a small down payment on a house. Yeah, part of it was all that free fun we were having, but it was also the tone: we didn’t feel like we needed to wear designer clothes, we didn’t need to spend extravagantly on vacations, we didn’t feel pressured to live a more expensive lifestyle. It was just assumed we’d eat at a friend’s house instead of going out to eat (and a few years in, we had gotten pretty darn good at cooking).
We stumbled into this somewhat accidentally, but maybe you can be more intentional about it. Choose your friends carefully—are their habits ones you would want to rub off on you?
8. Your Money Feelings Come From Your Family
You have feelings about money, whether you choose to acknowledge them or not. Maybe you have a deep anxiety of running out of money, maybe you abhor debt with every cell of your being, maybe you never ever talk about money. Guess what—you probably got all those feels from your family.
It doesn’t matter if your family actually taught you about money: you absorbed information about finances from them like an unwitting sponge—for better or worse.
If your family lived in a 5-bedroom house, you probably expect to live in a 5-bedroom house. If your parents drove a leased car, you probably expect to drive a leased car. If your parents always went out to eat, that’s probably your expectation too.
Take stock and acknowledge that’s a thing: your family will set your financial expectations. And if there is anything you want to change, now is the time to dig in your heels and explore a different way.
9. You Need a Budget
Ah, finally, we made it to the budget. This is the secret to making the most of the dollars you have, it helps you gain total control over your money, and it gives you a plan for those big life expenses. Here’s the secret no one tells you: budgeting helps you live life on your terms.
So say you want to take a gap year? Travel the country in a van? Pay off your student loans? Move to a different city? Buy some Air Pods? Budgeting helps you do those things with less stress, less debt, and total control over your decisions. Budgets aren’t restrictive, they’re a tool to ensure you have money for the things that matter most to you.
Want some bonafide apples-to-apples proof? These two guys graduated with the same degree, started a job at the same company, and one of them had a budget the other didn’t. Five years in, and the budgeter had twelve times the wealth of the non-budgeter (and now, they both budget).
Maybe you don’t have a job, or you don’t have much money. It doesn’t matter. A budget takes the money you have now and gives it all a purpose and direction. And during this odd time, purpose and direction sounds pretty good.
So what’s your next move?