The following, circa 2011, is a great guest post about money tips for young adults by Marissa at Thirty Six Months. I’m fleshing it out with my own tips and moving it on up to help as many students and grads as possible. 🙂
I was having a conversation with my grandparents the other day about how much debt I am in and how much post secondary education really costs these days. I find that a majority of GEN Y students are coming out of school with more debt than they realize and are not really prepared to start tackling it. I mean let’s think about it, we don’t get taught about consumer debt in school, so the minute that we step on campus we have credit card companies lined up to “give” us money, and since we haven’t had access to free cash before, we all jump at it.
The way most student loans work, here in Canada anyway, is that they will lend you funds to support your education and will start charging interest 6 months after you graduate. Most students either don’t think that far ahead when it comes to interest rates or assume that since they are getting this great education, they will find a great paying job and will be able to pay off the loans rather quickly.
As a recent grad I have a few tips to share after graduation to get rid of the bad debt:
- Don’t borrow more that you need, it is amazing when you are “given” spending money through student loans, but remember you will have to pay that back- with interest (lots of it).
- Try to work during school, whether it is an internship, a part-time job, or kind and generous parents, try to come up with most of your living expenses through different means other than student loans.
- When you do get out of school, start making payments as soon as possible to pay down your debt. This is assuming that you only have student loans and no credit cards.
- If you have credit card debt, start paying the one with the highest interest and work your way down.
- If it’s possible to pay more than the regular suggested monthly amount, do so. You can save thousands of dollars in interest and your loan can be paid off a lot sooner. The extra payments go directly to the principal so the amount that would pay interest on is lowered.
- MAKE A BUDGET. I know student/recent grad budgets are tricky. The life of a student is a lot more flexible and fun, and once you introduce a budget, things get a bit more rigid. But trust me on this, it will save you a lot money later on and you will learn to live within your means.
- Make goals and stick to them. There are tons of spreadsheets on the web that will help with debt repayment strategies, find one that works for you. Whether your 5 year goal is to have a house, a new car, or a trip, find a goal and make it happen. (From Crystal: You can email me any time at budgetingfunstuff*at*gmail.com for a free debt and bill tracking spreadsheet I inherited from John when I bought marriedwithdebt.com)
- Find side incomes. Most of us are not lucky enough to land a high paying job after graduation (we settle for anything that will pay our bills for the time being), but we do have skills that can be utilized so we generate different streams of income, whether it taking a job, freelancing etc. Find your hustle.
- Move back home if you can. It can be difficult once you taste the freedom of living on your own, but think of it as something temporary and put the money that you would be paying for rent towards your debt/saving account. (From Crystal: I’d suggest staying on your own if you can afford it but taking on a roommate. The key is to save money…and your sanity.)
- Have/create an emergency fund. This will save you during those times when everything is going against you. You will thank me for this later.
I know there are incredibly bright people who make mistakes when it comes to money in their youth. It is part of growing up. I honestly think there needs to be courses in high school so that everyone can understand what good debt and bad debt is and how interest costs work. Alas, until that happens, it is up to us to figure it out and learn along the way.
I have close friends still paying off their college debt and we’re in our 30’s. They borrowed more than necessary and have regretted it for more than 10 years. Learn from other people’s mistakes – it hurts less.
All of the tips above are gold. To boil it down, I truly think the first tip is key – don’t borrow more than you absolutely must. Then, live cheap to pay off whatever debt you ended up with.
When we first graduated, my husband and I picked out cheap apartments, stuck to a strict $2000 a month budget, and started looking for ways to earn more. We have had roommates 6 of the 11 years since we graduated from college and it’s actually pretty awesome some days and as annoying as it sounds on others. BUT, it’s always nice on rent day. But this equation has two main parts – spend less or make more. I also started this site, which has brought in $100,000 on its own since I started it in 2010. Start you own site or “find your hustle” like Marissa said! I grew my hustle into my business and have been fully self-employed since July 2011.
If you need any further tips or help as you make progress, shoot me an email for ideas or just as an accountability partner. You can get out of college debt or avoid it altogether. Good luck!
Do you have suggestions to add for young adults starting out?