Are you a recent college grad? Are you younger than 30? It’s no secret that you have been hit hard by the double whammy of increasing school loans and a very tough job market. As you start your career and your adult life, you have more debt than any generation before you. You also face the real prospect of not finding your dream job in this economy. Even if you do find the work you want, chances are that you will make less money in your new position than those who came before you.
A recent study by the Federal Reserve Bank of New York (FRBNY) shows that you are living with your parents after graduation in record numbers. Chances are that you are delaying the purchase of your own home. Your personal finances don’t look like the finances of prior generations. You have record amounts of student debt. You are less likely to use a credit card (63% of you don’t even own a credit card*). You start investing in your retirement much later than previous generations. You are not buying homes, but you are buying cars. You are even getting married much later in life than your parents…if you decide to get married at all.
Step 1: Set Goals
In a recent article, I gave some advice to recent college grads about saving and paying off debt. However, saving and paying off debt are only part of the solution. You need to create goals and make a plan to achieve those goals. Ask yourself what you want to accomplish in the next 5 and 10 years. Do you want to get out on your own? Do you want to buy a home? Do you want to marry? Do you want to become debt free? Do you want to invest in rental property or a business of your own? Having goals and a budget will keep you focused and will prevent you from living beyond your means. You will have the ability to put money in savings and invest in your future.
Step 2: Make a Plan
You need to create a plan to make your goals a reality. Start by listing your goals as well as the cost of reaching them. Be sure to add a time frame for achieving each goal. Next, determine how much money you need to set aside each month to reach that goal. For example, if you want to buy a new car in three years and you want to have a $5,000 down payment, how much money do you need to save each month? 3 years is the equivalent of 36 months. Divide the $5,000 by 36 and you find that you will need to save $139 each month to reach your goal of $5,000 in three years.
Let’s take a look at another example. What if you want to move out of mom and dad’s house into an apartment with your best friend from school? You will need to come up with your share of rent for the first and last months, utility connection costs, etc. You will also need to check your budget to see if you can even afford the costs of moving out of the house. You estimate that you will need to save $1,200 for your share of move-in costs. You want to make your move in six months, so you will need to save $200 every month to reach your goal. You also estimate that you will need to budget for $1,000 each month in rent, utilities, phone, and food. Can you do it? The only way to know is to create a budget around your new living arrangements. If you don’t know how to start the budgeting process, you can find helpful information here.
Step 3: Put Your Plan into Motion
With your plan in place, you actually need to do what you planned. Create a savings account for your goals and start setting money aside every paycheck or every month, until you reach your target. Be sure to track your progress to ensure that you are sticking to your plan. You could even automate your plan by having money direct deposited into your savings account. Your Human Resources Department can help you set up the direct deposit. You won’t see the money, so chances are you will do a better job of sticking to your plan.
You need to become disciplined. Keep to your plan, even when your friends want you to go out and you don’t have the money in your budget. Learn to say no to yourself and to others.
Step 4: If You Need Help, Get Help
Budgeting and learning to live within your means are not easy when you’ve never had to do it in the past. Luckily, there are expert non-profit agencies like Apprisen that are ready to show you how to budget, set goals, and keep your finances on track. If you need help, call us at 800.355.2227 or visit us online.
One Last Thought
Many studies also show that you are far more optimistic about your future and your ability to reach your goals than any of the generations in front of you. That optimism is a real strength that will help you succeed.
* 2014 report by bankrate.com