As a recent graduate, it’s likely you’re being bombarded by advice. Everyone from Grandma to strangers on the Internet have great advice for starting your life post-graduation. And you should take all the advice you can get. Well, first filter out the bad advice, and then take all the rest.
Older adults are more than willing to tell you what they wish they would have known or done after graduating. Listen to them; their experience trumps your perceived knowledge. By now you probably feel like you’ve heard it all, but here are five relatively unorthodox pieces of advice to help you prepare for your financial life as a working adult.
1. Learn how to tip (like an adult).
Treating service industry workers well by tipping them is just straight up good karma. Every adult should know when and how much to tip in everyday situations. Tipping waiters, waitresses, bellhops, taxi drivers, barbers, hair stylists and bartenders is a sign of true adulthood. There are different expectations for each of these situations, but you should set your baseline and tip from there. A baseline of 20 percent allows you to go up or down based on performance without cheating someone out of what they’re owed.
2. Set money aside for student loans.
This one may seem like a given, but you’d be amazed at how unprepared many college graduates are to address their student debt. Here are the basics. Your student loans will go into deferment immediately after you graduate, and you usually have about six months until they are due. This six months feels like a necessary reprieve to get your life in order, but what it actually does is make you complacent. You forget your student loans exist, and on some chilly day in November when you get your first bill, you’ll be shocked by how much you owe.
In 2013, the national average of student loans debt was $29,400. To pay off $29,400 worth of student loan debt in 10 years, you’ll have to fork out $339 a month. Don’t just cross your fingers and hope you have enough each month. Plan for your student loan payment from the day you graduate. Be proactive and call your student loan provider to get your monthly payment amount and the due date.
When you get a job and determine your take-home pay each month, immediately subtract your student loan. If you bring home $2,000 a month and your student loan payment is $339, then you actually bring home $1,661. You will budget from this amount for rent, transportation expenses, food, etc. For the first six months when your loan is in deferment place the $339 monthly payment in a savings account. This will provide you with an emergency fund, which will come in handy when there’s an unexpected expense.
3. Set a weekly food budget.
There is no meal plan in adulthood, and you’ll quickly realize food is a major expense each month. You eat roughly 93 meals a month and if you are in the habit of eating out, things can get out of hand fast. Twelve percent of your take-home pay is a reasonable amount to budget for food and dining out. If you bring home $2,000 a month—and subtract your student loan payment, if you have one—you are working with $1,661 a month. This leaves $216 for food. Keeping a monthly budget is a challenge, so a simple way to make a food budget work for you is to break it down into a weekly amount. Look at $216 divided by four weeks—that allows you $54 to spend each week on food. Knowing in advance you only have “X” amount to spend will limit unplanned trips to the grocery store and convenience dining options like takeout and delivery.
4. Live close to work.
You are excited to get your own place, but there should be some caution in your selection. It’s common sense to not spend too much on rent, but you should also consider where you live in relation to where you work. Since you drive to and from work 10 times a week, the distance between the two is very important. If you spend the majority of your time in one area, you should try and live as close to that area as possible. Living close to work means a shorter commute and lower transportation costs. Saving time and money is just about the best reason to do anything ever.
5. Save 10 percent of take-home pay.
Saving is a crucial element of a successful financial life that is often put off during times of financial stress or low income. It’ll take discipline, but there is a simple method to help you save no matter how much money make. Remember the decimal lesson in 3rd grade? All you have to do is move the decimal point. On your first paycheck move the decimal one space to the left. That number is 10 percent of your take-home pay, and it’s what you need to put in savings. You’ll probably have to make sacrifices to save 10 percent of your income, but you know what you won’t sacrifice? Your financial future.
A college degree unfortunately doesn’t equal financial genius. You will make mistakes. But following these five tips will at least prevent a few. Learning doesn’t stop after your last day of class. Knowledge and common sense are the best assets in your financial toolbox, so start learning now and keep it up for the rest of your life. Start with my previous column to read up on more essential finance tips for recent college graduates.
Peter Dunn, aka Pete the Planner, is an award-winning financial mind who has authored five books, hosts the popular Pete the Planner radio show and travels around the country offering financial education. His signature wit will have you laughing as you learn. For more from Peter, visit www.petetheplanner.com.