Paying For College For Dummies
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Hopefully you will soon complete your college degree or other desired training. And, even better, you will find a job and become financially independent. Make sure that you set out into the real world with important knowledge regarding managing your money and making the most of the money that you earn. This article highlights ten important things that you should know.

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Get financially fit, now!

Moving to a full-time (first) job is a big deal and a big change for most young adults. Embrace getting your feet on the ground financially speaking!

Probably the most important thing you can do is to keep your living expenses down and subdued so that you can live within your paycheck and hopefully save some money regularly (more on that in a moment).

Some say to live like a college student! Most people are happy during college despite living in small living quarters and not wasting a lot of money on clothing, furniture, and so on. Maybe you even saved money then by taking care of your own food preparation. But, if you got most or all of your meals in a dining hall, know that having someone else make all your meals is usually pretty costly!

Don’t procrastinate getting on top of your personal finances. You may overspend and accumulate high-cost debts, fail to save toward goals and things you care about, lack proper insurance coverage, or take other unnecessary risks. Early preparation can save you from these pitfalls. Learn as soon as possible how to live within your means, save and invest regularly, legally minimize your taxes, and so forth.

Adapt and adjust along the way

Changes require change. Over the years, your life will inevitably evolve and change. Even once your financial house is in order, a life change — such as moving to a new area, switching careers, getting married, buying a home, starting a business, and so forth — should prompt you to review your personal financial strategies. Life changes affect your income, spending, insurance needs, and ability to take financial risk.

Making the most of changes and transitions requires managing stress and your emotions. Life changes often are accompanied by stress and other emotional upheavals. Don’t make snap decisions during these changes. Take the time to become fully informed and recognize and acknowledge your feelings and financial considerations. Educating yourself is key.

Cancel consumer credit

The use and abuse of consumer credit can cause long-term financial pain and hardship. To get off on the right financial foot, young workers need to shun the habit of making purchases on credit cards that they can’t pay for in full when the monthly bill is due.

If you keep a credit card, be certain that you can pay each month’s bill in full and on time. Setting up for automatic electronic payment from your bank/investment account can help you accomplish that.

I have no problem with your using “reward cards” to earn benefits from your credit card transactions. Just be sure that you’re not spending/buying more to get more rewards!

Here’s the simple solution to not run up outstanding credit card balances if you have had or may have that tendency: Don’t carry a credit card. If you need the convenience of making purchases with a piece of plastic, get a debit card. Just be aware that debit cards quickly deduct transacted amounts within a day or two from the connected bank checking account in contrast with a credit card, which sends you a monthly statement and has you pay once per month.

Review your budget and spending plans

Even before getting your first full-time job and moving into your apartment, how about putting together a preliminary budget/spending plan? This will take some research, especially with regards to apartment rental costs. Go out and look at actual apartments. And take one of your parents with you. You may not always agree with them, but they have decades of experience in the real world including making housing decisions. They can help you avoid common mistakes.

Your parents, who have been paying bills for decades, can clue you into the cost of the other things in your prospective budget. You could also speak with older siblings and friends.

In addition to housing costs, here are some other important expenses to consider and understand:

  • Income and other taxes: Employers quote you the gross (before-tax) salary or wage they will pay you. What matters, though, is your take-home pay after taxes. Social security taxes will lop 7.65 percent right off the top, and you will pay federal income taxes as well as state income taxes in most but not all states. The IRS website and your state’s website have tools that enable you to estimate the tax withholding that you will face.
  • Transportation: If you expect to have a car, you can figure your insurance costs by contacting insurers and getting quotes for a car you may be considering. Gasoline and maintenance costs will add to those expenses – your folks can help you estimate those too. If you’re going to take public transit or use taxis/ride-share services on occasion, be realistic when you estimate those costs.
  • Personal insurance: You need to have health insurance and should also have long-term disability insurance. Your employer may offer them both and can tell you what your cost for these will be. That’s another reason you should always take the time to understand your employer’s benefits. You don’t need life insurance unless others are financially dependent upon you.
  • Food: Some employers offer subsidized meals so that may help. Estimate what you will spend for food that you buy in grocery stores and for meals out or delivered. If you’re a bar hopper with your friends — which is a costly habit — include those expected expenses as well.
  • Clothing: Again, be realistic here!
  • Entertainment: This can include cable and streaming services, sporting events, concerts, comedy clubs, or whatever else you enjoy that costs money.
  • Cell phone and internet service: Be sure to shop around as prices vary quite a bit and there’s lots of competition these days.
Also, if you have student loans, you should understand when you will be required to begin repayment and what those monthly payments will be.

Strive to regularly save and invest

Ideally, you should start saving and investing money from your first paycheck. Try saving 5 percent of every paycheck and then eventually increase your saving to 10 percent. If you’re having trouble saving money, track your spending and make cutbacks as needed.

You may want to first accumulate an emergency/rainy day fund and then direct some savings into a retirement account that offers you some tax benefits. Some employers even match a portion of contributions.

You may not want to save in a retirement account if you have some other shorter-term goal in mind, like accumulating down-payment money for a home purchase or saving money to someday start your own small business. Thinking about a home purchase or retirement is usually not in the active thought patterns of first-time job seekers. Regardless, saving money as you’re earning is a great habit and widens your options over time!

Ensure that you’re properly insured

When you’re young and healthy, imagining yourself feeling otherwise is hard for most people to do. Many twenty-somethings give little thought to the potential for healthcare expenses. But because accidents and unexpected illnesses can strike at any age, forgoing coverage can be financially devastating. You don’t want to again become financially dependent upon your folks, do you?

Check your employer’s benefit package to see whether it includes long-term disability insurance coverage. Smaller employers are more likely not to offer it. When you’re in your first full-time job with more-limited benefits, buying disability coverage, which replaces income lost due to a long-term disability, is wise if you’re not covered through your employer.

Continue your education

After you get out in the workforce, you (like many other people) may realize how little you learned in formal higher education that can actually be used in the real world and, conversely, how much you need to learn that school never taught you. Lucky for you that some companies provide training and make entry-level hires often for “aptitude and attitude,” not specific skills.

Read, learn, and continue to grow. Continuing education, and the increasing numbers of alternatives to college, can help you advance in your career and enjoy the world around you.

Always be prepared for a job change

During your adult life, you’ll almost surely change jobs — perhaps several times a decade. I hope that most of the time you’ll be changing by your own choice. But let’s face it: Job security is not what it used to be. Downsizing has impacted even the most talented workers, and more industries are subjected to global competition.

No matter how happy you are in your current job, knowing that your world won’t fall apart if you’re not working tomorrow can give you an added sense of security and encourage openness to possibility. So, structure your finances to afford an income dip.

Spending less than you earn always makes good financial sense, but if you’re approaching a possible job change, spending less is even more important, particularly if you’re entering a new field or starting your own company and you expect a short-term income dip. Many people view a lifestyle of thriftiness as restrictive, but ultimately those thrifty habits can give you more freedom to do what you want to do. Be sure to keep an emergency reserve fund – three month’s worth of living expenses is a good start.

Evaluate the total cost of relocating

At some point in your career, you may have the option of relocating. But don’t call the moving company until you understand the financial consequences of such a move. You shouldn’t simply compare salaries between the two jobs.

Benefits matter too, and benefits can be worth quite a bit. You also need to compare the cost of living between the two areas: housing, commuting, state income taxes and other taxes, food, utilities, and all the other major expenditure categories.

Ensure compatibility when picking a partner

Think you’re ready to tie the knot with the one you love? In addition to the emotional and moral commitments that you and your spouse will make to one another, you’re probably going to be merging many of your financial decisions and resources. Even if you’re largely in agreement about your financial goals and strategies, managing your finances in partnership with another person is far different than managing your money on your own.

Many couples never talk about their goals and plans before marriage and failing to do so breaks up some marriages. Finances are just one of numerous issues you should discuss. Ensuring that you know what you’re getting yourself into is a good way to minimize your chances for heartache. Ministers, priests, and rabbis sometimes offer premarital counseling to help bring issues and differences to the surface.

About This Article

This article is from the book:

About the book author:

Eric Tyson, MBA, is a renowned finance counselor, syndicated columnist, and author of numerous bestselling financial titles.

Tony Martin, B.Comm, is a nationally-recognized personal finance, speaker, commentator, columnist, management trainer, and communications consultant. He is the co-author of Personal Finance For Canadians For Dummies.

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