Congratulations, May Grads!

This weekend is the graduation weekend in my alma mater. A couple of my old friends are graduating. I guess some of you readers are graduating this month as well. Congratulations! On this occasion, JLP @ All Financial Matters asks - “What is one piece of advice or life lesson that you have for this year’s graduates (both high school and college)?” Here are my two bits -

For high school grads: Go to college and get a degree in a major that will result in a good high paying job. For some of you that may sound boring, lame and oh-so-clich├ęd. It does not matter, do it anyway. Think of college as an “insurance” policy for the rest of your life. If you are worried about how to fund college, Nick @ Punny Money has some very good advice on Ten Ways Anyone Can Go to College With Zero Student Loans.

For college grads: Postpone major purchases for atleast one or two more years. I know you have been itching to get out of college, earn some good money and buy a lot of stuff. Go ahead, indulge yourslef a little - but save the big ones for a little later. Instead, use the money to pay off debt or sit it in an account earning compound interest. Here is specifically what I am talking about –

Do not buy a new car
I got my job offer in March 2006, and was all set for graduation in August 2006. So sometime in summer, when my 14 year old car with 150K+ miles broke down, I just wanted to get rid of it and buy a new car. I promptly called some of the local BMW dealers. They assured me that if I can show them a copy of my job offer, they could get me approved for a loan and give me a “special” graduating student discount too. I was thrilled and called the better-half to share the news. He was not excited at all, and by the end of a rather lengthy conversation, managed to talk me out of it. The repairs for my old car cost $200. The new car would have cost me at least $500 per month for 60 months. Over the course of one year, I have saved about $6,000 by driving my old car. Moreover, I am financially better educated now and I don’t feel the need for a new car . I am not saying you should never buy a new car. But for now, put off the decision. Wait for a while and let your financial goals become clearer. You can always buy the car then if you still feel that it is one of you top priorities.

Share the rent
Of course this is not for everyone. But if you are single and don’t mind having a roommate for a little longer, then I highly recommend that you try to share the rent with someone. The rent for a two bedroom apartment is only a little more than a single bedroom apartment. By sharing the apartment with someone and reducing the amount you throw away on rent, you can save up for the down payment of your own house much faster. This is particularly important if you live, or plan to move to expensive cities in California or New York or something, where rent can easily cost half the paycheck!

Don’t spend too much for furnishing your place
One of the first few things I have noticed new graduates do, after getting a new car and a fancy apartment, is to furnish it with expensive furniture. I understand the urge to express individuality by furnishing your place according to your taste and likings. But that doesn’t mean it should be expensive (ever watched “design on a dime” on HGTV?). Look on craigslist – we found the dining set for our first apartment on craigslist in “almost new” condition for less than half the price of a new one! Check out garage sales – they are great for finding art and other decorative items. If you must have new furniture, get them from discount stores such as Big Lots or K-Mart or even Walmart. If you have more modern taste, look in Target or Ikea for easy to assemble furniture for a fraction of the cost of the furniture in bigger furniture stores like Ashley, La-Z-Boy etc.

And finally, educate yourself about handling money. Set some financial goals
It is amazing how some people can be in the work force for several years and not be contributing to a 401K, and not even know that they are turning down free money! Don’t be one of these oblivious people. Read, read and read some more about saving and investing. The earlier you educate yourself about efficient handling of money, the more you can save in the long run. Then figure out your financial goals. These two go hand in hand – as you learn more about handling money, you can determine your goals better. And as your goals become concrete you need to learn more about money management.

Hmm…. I started out to say just a couple of lines and here I am with a long winding lecture! The bottom line is, put off major purchases for later when you are better informed about handling money matters and in the mean time, use the money to pay away debt and establish a firm foundation for your future. Good Luck. And now, go party! Woohoo, ring dunk, anyone?

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3 Comments:

Wanda said...

I agree with all your points, but I just want to point out that you don't have to deprive yourself... if the ONE thing you've always wanted is a $400 chair, then take $100 out of your paycheck for several months and buy yourself that chair for Christmas.

Just be careful not to have a lot of things that you've "wanted forever." ;)

ispf said...

Good point, Wanda. As new grads, you have definitely earned your rewards, so do indulge yourself (responsibly)! Just remember that moderation is the key!

Lacey said...

I should be graduating in August with my Master's degree. College was my best financial decision.

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