How to Stay on Top after Graduation
MADELEINE BRAND, host:
This is Day to Day. I'm Madeleine Brand.
ALEX COHEN, host:
And I'm Alex Cohen. The end of the school year is rapidly approaching for many college students, and millions of them will be entering the workforce in the next few months.
BRAND: Here to give new graduates some financial tips is our personal finance contributor Michelle Singletary. Hi, Michelle.
MICHELLE SINGLETARY: Hi. How are you?
BRAND: OK, so if someone's about to graduate from college, what is the number one thing this person should do once they actually get a job?
SINGLETARY: They're not going to want to hear what I have to say. For many of these graduates, especially those with a lot of student loan debt and credit card debt, they probably should move back home with mommy and daddy.
BRAND: Oh no!
SINGLETARY: And I know they don't want to hear that...
BRAND: They probably don't.
SINGLETARY: But you know, the cost of living is so much across the country, and especially in big cities. And before they sort of venture out, get their own apartment, and set everything up, you know, they probably should take a year or two to kind of stay home and really save up. Now, if you're going to go home and just spend wildly, if I were your parents I wouldn't let you come back. But give yourself some time to really build up some cash reserves before you get out there on your own.
The next thing that graduates need to do is get a budget. Now, you say that and people's eyes just glass over, but if you want to start your life out right, financially, you have got to budget. You have got to spend less than you're bringing in so that you can build a cushion for yourself as you go forward in the real world.
BRAND: You know a lot of graduates will have a lot of debt on their hands - student loan debt. Should they really begin saving for retirement right away or even thinking about it?
SINGLETARY: Yeah, absolutely! People always ask me, if I'm in debt I shouldn't save, and I shouldn't save for retirement? You absolutely should still build up an emergency fund because if you don't you end up going into debt when life happens, and life will happen. Your car will break down, your roommate may move out, mommy and daddy might kick you out, so you need a cash reserve. But you also should begin to save for your retirement.
You have youth and time on your hand. Just waiting ten years you'll have to save so much more than if you start now. Listen, if you're 21 years old, and you start saving just 200 dollars a month from 21 to 65, and that portfolio earns an average of about six percent, you could have more than half a million dollars at retirement.
BRAND: So, what else should 20-somethings be doing right away?
SINGLETARY: Well, one thing they shouldn't be doing is buying a lot of things. People, you know, maybe they've driven their hoopdy (ph) through college, or they've had their, you know, ratty clothes, and they get a new a job and they want to buy a whole new wardrobe, they want to buy a new car...
You want to curtail your spending. Don't buy that new car. Buy a used car. Don't buy a new wardrobe. Listen, these people have never seen you before. You can match some things together until you build up an emergency fund, and I get this question from graduates all the time. Don't I need this great wardrobe to make this big impression?
The only impression you're going to do is make it on your credit card from sliding it through the machine so much! Just don't go out and be a consumer right away. Continue to live like you were as a student until you get your feet solid, financially.
BRAND: Michelle, thank you.
SINGLETARY: You're welcome.
BRAND: That's Day to Day's personal finance contributor Michelle Singletary. She also writes The Color of Money column for The Washington Post.
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