The time when a student is graduating and moving to the workforce is a very pivotal time of their life. Here is a breakdown of some of the most important things graduate students need to know about money before spending their first “real job” salary or moving out of their parents’ home to live on their own.
Calculate How Much Money You Need Before Moving Out
This was a big question people have after graduation. You are lucky if you get a job after college that is close to where you live. Even then some of you may not be comfortable living with your parents (or vice-versa!).
The last thing you want to do is run back to your parents asking for help.
So, how much money should you have in the bank before moving out on your own? Honestly, it really depends on where you want to live and your circumstances (sorry, there’s no magic number).
But here is a list of costs you need to figure out to get you a head start on living an independent life. You can expect which you need to pay for before your first salary arrives:
- Deposit for rent
- Furniture & Household items
- Bus/Train/Transport pass
- Groceries for a month
- Emergency Funds (at least 2 months to cover the above costs)
Start with a Plan
Get an excel sheet and plan out what you need. Prepare a budget to get an idea of how much money you need. Budgeting is one of the best financial habits you are going to be needing in your adult life.
Keep expenses low
Based on what you planned, look at the various ways you can keep your expenses low till your job becomes steady and your starting salary and monthly income are regular.
Till then here are a few tips to keep expenses low:
- Bunk with friends where possible
- Dorms are another great low budget option
- Pick up furniture and equipment second hand
- Avoid splurging on a great closet for the new job. Get what is necessary
- Don’t feel shy to borrow things from your siblings or parents. You can always return them once you settle down
Make a Budget ASAP
Once again, we can’t stress this enough. If you want to get a firm handle on your finances right out the gate and take financial literacy seriously, you need to make a budget ASAP! If you don’t have one, get a budget template from online, there are plenty of them out there. Using a budget template will save you time and give you a good idea of what you should do with your first pay cheque.
Set up some financial goals for yourself once your monthly income is here. You need not go as far as starting a retirement savings account (you should though if you are able to!). Cover the basics such as:
- setting up an emergency fund to cover any potential threat to your regular income
- unforeseen medical emergencies
- moving to your own place if you are living with others or a dorm
- savings account and starting to save a bit
- debt payment such as clearing your student loan or cards if you have one
Remember, the rule of thumb is to pay yourself first. That means that you shouldn’t just save whatever money is left over after paying rent and bills. First, decide how much money you want to save, then whatever’s left is how much you should spend on rent and bills. This will help you figure out how to cut unnecessary expenses (like Netflix or cable) so you can make saving money a priority.
Seriously, start saving as soon as you can and as much as you can. Your future self will thank you!
Live Like a Student for as Long as Possible
For the first couple of months you are on your own, it makes sense to continue living the frugal life of a student.
I remember when I got my first real job after graduation. The idea I had in my head of how life would be was a bit ridiculous. I thought that making a salary and living on my own meant I could finally stop living like a poor student. Oh, how wrong I was.
Don’t Keep Up With the Joneses
Sure, you can try to keep up with some of your friends and spend all your money on eating out, buying new clothes and going to concerts every weekend. But know that as much fun as it would be to spend money freely, it wouldn’t help get you to where you want to go.
Being Frugal Doesn’t Mean You’ll Miss Out
Being frugal does not mean you miss out on the fun and partying. You just need to be a bit more creative when it came to finding ways to have fun.
Instead of going to the bar and spending 150 bucks on drinks, invite friends over and spend a lot lesser on a bottle of wine. Instead of spending money on checking out the latest film festival or event, volunteer so you can get a free pass. Instead of spending money on lunch during the week, take your homemade lunch to work every day.
Not only will this help you stay out of debt, it will also help you grow your net worth and be financially stable during the initial stages of your career.
Don’t Quit Your Part-time Job
If you have not found a job yet after college and still finding one, don’t make the mistake of quitting your part time jobs. If you don’t have one, look at getting one soon. This will help you pay your bills while buying you time to get your dream job.
Yes, it will be tough to handle a part time job and look for work. It may not sound like the fun thing to do in your 20s, but work as hard and as often as you can while you’re young. It’s not easy juggling two jobs, but it’ll absolutely help you save more and live better down the road.
Paying off debt vs Saving
Last but not least, this is the question I get the most from people I know and readers. A lot of people struggle with this one because they have debt to pay off, but they also want to be smart and start saving as soon as possible. That and they want to make sure they have the right amount of cash on hand so they don’t get into further debt if an unexpected expense pops up.
This is another one where it really depends on your circumstances. Personally, I know a lot of people who are very anti-debt, and just want to crush that debt hard! At the same time, I don’t believe you should be putting all your money into paying off debt. You should find the right balance for you so you can pay off your debt as fast as you can, while also having enough to put away for emergencies.
There is also the question of interest rates. If your debt for some reason is much cheaper or has a lucrative tax break then it may make more sense to keep paying that longer and save the excess money.
It really comes down to calculating how much you need to put down on your debt what is the trade off in paying off the debt and saving. And if that means that you need to find a second stream of income to crush that debt and save some on the side, then do it!
Have a side gig
That brings us to second stream of incomes. Most of us have a lot of talent that can be put to great use. Teaching tuitions, acting in plays over the weekend, translating documents and so much more.
It is absolutely important that you look at maintaining a stream of income from a side gig that you absolutely love.
Not just for the money, but this will also be an avenue for you to vent your job related frustrations out and balance you out. And the icing is that it would pay you.
So, find something you love to do that can add some income on the side. If your first real job ends up being tough, so it’s nice to have something that will keep you motivated and give you something to look forward to.
Other interesting reads:
- Walnut App Review – An Expense Tracker that’s automatic and Free
- Not happy with your job? The Side Effects Of Staying In A Job You Hate