Congratulations to the college Class of 2021! You have come a long way, faced a lot of challenges (particularly during this past year!) and are now ready to graduate and head out to life in the real world. It’s time to think about jobs, where to live, and maybe even marriage and family. Before you rush head-long into all of that excitement, though, take a moment and absorb some of these financial lessons that will provide a strong foundation for your financial future:
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- Think twice before blowing the graduation money: Generous family members might give you a large cash graduation present, but try not to spend it all at once. I know you might have put up with living in cramped quarters and driving a “vintage” car through the college years, but it’s unwise to spend all of that money on the first “shiny penny” that catches your attention. Really think about how you want to spend or invest your gift, and maybe put something away for another day.
- Get those student loans in order: Before you leave campus, or before your classes are through, spend some time with the financial aid office to find out how much you really owe in federal student loans. You might be surprised at the amount that has accumulated. Look at your repayment options and find out what your monthly payments will be. Do the same with any private student loans you may have. This will give you a good idea of how much you will have to set aside each month from future earnings for loan payments. Although some changes were made during COVID, it is highly likely that your federal student loan payments will begin this November.
- Do some rough budgeting: Unless you already have a job and know your exact salary structure, try to think about how much money you will need to earn to support the lifestyle you want to attain. If your earning potential does not cover your financial needs for housing, transportation, daily living, and loan payments, you’ll have to rethink part of your money strategy.
- Start saving money as soon as possible: Yes, really. If the past year has taught us anything, it’s that our everyday life can get turned upside down in the blink of any eye. Many families faced financial hardships because they were suddenly confronted with medical issues or job loss, and had nothing left to live on. Once you have income coming in, set at least a little aside from each paycheck to put towards future purchases, rainy day needs, and maybe even your retirement. It’s funny to think about retirement when you might not have a job yet, but get in the habit of putting even $25 away now and increase it as your earning capability grows. You won’t have to worry about retirement in 40 years because you’ll know you already have a nest egg to draw from.
- Decide now to make financial decisions based on your own needs: One money hole many people fall into is that they are constantly trying to keep up or put on a good show for others. Make a choice now that you are not going to spend or borrow money just to have the biggest house, fastest car, or newest phone. Decide that you will only make purchases when you have a need, and that you will conduct research to make the most financially sound purchases possible. A good credit score can help provide favorable financial terms for major purchases. Keep away from a lifetime of credit card debt, refinancing and possible bankruptcy, and focus on making yourself and your family happy.
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Good luck to this year’s college graduates. I wish you all a beautiful and bright future!
If you are a college-bound high school junior, set up a CFAA new client free strategy session now to learn more about financial aid and finding ways to pay for college. To get the latest financial aid information and college application to-do lists, look for my weekly JustAskJodi emails and check out my monthly CFAA e-newsletter