4 Ways to Prep For Your Post-College Life – Right NowNovember 1, 2019
College life can be a bubble. In many cases, you’re shielded from the real-world realities of full-time jobs, rent and student loan payments. But before you know it, graduation will pass and you’ll be thrown into the responsibilities of adulthood.
“You need to plan for the future, and the future is here,” says Barbara Thomas, executive vice president of Education Loan Finance (ELFI). “It’s not just when you graduate.”
But you also don’t have to sacrifice a memorable college experience to set yourself up for future success. Here’s how to estimate — and plan for — the cost of your post-grad life.
1. Make a list of future monthly expenses
Having a sense of how much life costs is helpful for choosing a major, researching jobs and negotiating your first salary. It’s okay to estimate for now. For example:
- Rent: Nationally, a one-bedroom apartment typically costs about $1,000/month, but that could be higher or lower depending on where you live. Research typical rents for your area (or the place you want to move after college) to get a better sense of what to expect.
- Student loan payments: You’d owe about $333/month on a $30,000 student loan balance, which is about what the average undergraduate owes at graduation. (This assumes a 10-year repayment schedule and a 6% interest rate). Use a student loan calculator* to see an estimate of how much your future monthly payment would be based on your loan amount, interest rate and repayment terms.
- Food: If you live off-campus and buy your own groceries, your current food expenses are a good indicator of how much you’ll spend on food in the future. For this example, let’s say that’s $500/month.
- Transportation: If you have a car, include your monthly payment, insurance costs and gas. If not, budget for public transportation and Uber/Lyft. Let’s say this costs $300/month.
- Other bills: This includes utilities, internet and your cell phone bill. If you split costs with roommates and are still on the family phone plan, let’s say this sets you back $150/month.
- Miscellaneous: Include other categories that apply to your life, like clothes, travel, and personal care items and services. Let’s say this all costs $250/month.
2. Add it all up, then account for taxes and savings
In this example, your total monthly expenses come to $2,533. But you’re not done yet — there’s a lot this number doesn’t include. For one thing, the government takes money out of each paycheck for taxes, Social Security and Medicare. You also need health insurance, the cost of which may get taken directly from your paycheck if your job offers it.
Those costs vary based on factors including the amount you earn, where you live and your job’s benefit package (use a paycheck calculator to estimate yours), but they could easily run you $1,000/month. This puts you at $3,533/month in this example, or about $42,000/year.
You’re still not quite done. You need to be saving for the future and for inevitable emergencies like car trouble or accidentally smashing your phone on the sidewalk. Experts recommend saving 20% of your paycheck, which is about $600/month in our example. (That may not be realistic at first, but it’s an excellent goal.) So, you really need to earn $4,133/month, or about $50,000/year.
3. Make adjustments to save money
You might be panicking a little right now, but these numbers are attainable. The average annual starting salary for the class of 2018 was about $51,000, according to a survey by the National Association of Colleges and Employers.
Plus, there are ways to cut your monthly expenses to make some wiggle room in your budget. For instance, student loan refinancing* can potentially shave hundreds of dollars off your student loan payment by lowering your interest rate. To qualify, you’ll need good credit, which takes time to build. While you can’t refinance until you at least have a post-college job offer, you can start establishing credit now.
You can use a student loan refinancing calculator to see how much student loan refinancing could save you.
4. Get a credit card (but don’t carry a balance)
Student loan refinancing isn’t the only thing that demands good credit. Almost everything you’ll need or want to do after graduation — rent your own apartment, buy a car, travel on the cheap with credit card points — requires a strong financial track record. The easiest way to establish good credit is to get a credit card, use it and fully pay it off every month.
As a student, you’re limited in your credit card choices because you don’t have much of a credit history. Your options are:
- Get a secured or student credit card. These cards require a deposit (secured cards) or that you have an income (student cards), but they’re designed to help you get started. Over time, you can add other cards with more perks, like cash-back and travel rewards.
- Ask a parent to add you as an authorized user on their card. This gives you a copy of the card to use, but keeps the payment responsibility on them. Before going this route, double check that the card company will report the card activity to the credit bureaus (the companies that create credit reports) on your behalf. Otherwise, it won’t help your credit.
Having a credit card will only help you if you spend within your means and consistently pay off the balance on time. Otherwise, you’ll rack up interest charges and be stuck with debt you can’t afford.
By doing these four things, you’ll emerge from your college bubble ready to take on the “real” world.
*Subject to credit approval. Terms and conditions apply.
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