Congratulations! You’ve graduated. Unless you’re planning to head right on to more schooling, you may well be searching for an internship or a full-time job. No matter what your immediate plans are, it’s time to take careful stock of your current situation and what your goals are
There is a tremendous temptation for new graduates to bust out of their previous situations. If you were living with a roommate, it’s tempting to find your own place. If you were living with your parents, it may be tempting to find an apartment. Graduation ceremonies are called “commencement,” and the temptation to begin, or commence, on a brand new adventure is very tempting.
However, this would be a very good time to sit tight, stay where you’re at, and build up some savings. If you’ve got a good job lined up, enjoy it. Dig into your new career, enjoy building relationships with fellow employees, and start learning from your new boss. This is a terrific opportunity for you. When real paychecks start rolling in, park them in the bank, and build yourself an emergency fund.
Savings accounts are not glamorous. They don’t feel like new clothes, or drive like a new car. But new cars require you to pay more in insurance and higher property taxes, and new clothes may not be necessary just yet. It’s time to buy what you need, not what you want.
This is easy advice to give, but very hard advice to take. You’ve been thrifty, frugal and downright broke during school. Why should you keep living like you’re poor once the paychecks are finally rolling in?
Because a savings account is the best insurance you’ll ever have. With savings, a flat tire is a nuisance, not a nightmare. Once you’ve saved enough for an emergency (experts suggest keeping $1,000 in the bank for “just in case” catastrophes) then your “needs” can open up a bit.
Is driving your car a daily lottery? “Yahoo! It started!”
Find a trustworthy mechanic with the help of your new co-workers and get your current car looked at. If a little work will keep it on the road, use those paychecks to keep your current car on the road. With what you’d have spent in car payments, start a 401(k) at your new job. You’ll enjoy having no payments, you’ll enjoy paying lower taxes, and you’ll never, ever regret saving for your retirement. If your car is truly ready for the crusher, a reliable mechanic can tell you that before you dump any more money into it. A really reliable mechanic can also help you assess a good used car before you purchase a new one.
A student apartment is not exactly a glamorous set up, but if your neighborhood is safe, your roommate is friendly and you can stay, then stay. You won’t need a deposit or furniture for the new place, and you can build your emergency fund or start your 401(k).
If you’re living with your parents and everyone is getting along, stay put. It doesn’t matter what anyone else thinks. Your parents are great folks (they raised you, after all) and your living situation is your business. The pressure to go out and get your own place only counts if your folks are the ones applying it. People of other generations may not understand your ability to get along with your parents. That’s their loss.
You are newly graduate and on your way to great things. Debt is not a great thing. Take care with your income, purchase what you need, pay yourself first, and enjoy this new adventure.