The Most Critical Six Months in a College Grad’s Life

Graduating from college is one of life’s most thrilling events. Finishing my degree, walking the aisle and receiving a fancy document in a leather-bound case remains one of the high points of my life.

A diverse group of young adult graduates

Leaving college life behind, I was ready to live life to the fullest, whatever that meant. I was so over living under campus rules, grueling classwork, never-ending papers, mid-terms and finals. I was ready begin life in the real world.

Unfortunately, I still had a lot to learn about managing finances. I knew nothing and worse, wasn’t aware that I knew nothing. What was there to know, anyway?

Sadly, I am not alone. Today’s graduates are smart but generally financially ignorant. For college graduates gearing up to enter the real world, I offer the following for starting off on the right financial foot.

The decisions and choices you make in the first six months after graduation have the power to set the course of your life, for good or bad.

Of course, you’ve been a poor starving student long enough. You deserve a new car. And certainly you need a better apartment. And some decent clothes. Oh, and who could possibly deny you a European vacation to celebrate this amazing achievement? Followed by a couple of weeks’ vacation to rest and relax. You’ve been through so much.

You reason: Things are looking good in the employment department, you’re only young once, it makes sense to do this now before you’re tied down with a job, a home and kids. I could go on, but I’ll stop. And you should too. Stop thinking like that!

Taking on a car loan, the obligation of a lease on an apartment or condo, climbing credit-card balances—all of that may seem innocuous, given the great job you plan to land somewhere, somehow. And that will backfire on you. Instead of launching you into the real world, it will send you into a downward spiral that collides with unpaid student debt, negatively impacting your life for many years to come.

STOP, DROP AND ROLL. You learned it in elementary school for fire drills. Now apply it to your financial life. If anyone offers you a contract to sign—for a car, an apartment, a credit card or other legal obligation—Stop! Drop the pen and then roll out of there fast.

KEEP DRIVING YOUR CLUNKER. Yes, it’s embarrassing. That car you had to drive while in college is a pile of junk. It’s just not you! And those are exactly the kind of thoughts you need to get rid of. First, you are not what you drive. Your car is simply a means to get from here to there. Keep it. Love it. Be grateful.

MOVE HOME.  Whatever it takes, do not create any new debt during these critical six months, and possibly much longer. If that means moving back with home for a while, do it.

TAKE A JOB, ANY JOB.  You need cash flow, so take the first job you can get. Then keep looking. Perhaps you’ve heard the term “stepping-stone?” There is nothing wrong with this. Keep your eye on the goal and get to work reaching it. Stop whining and feeling sorry for yourself.

MAKE PAYMENTS. You need to immediately begin paying back your student loans, whether a little or a lot. Do not luxuriate in the six-month grace period. That is not some kind of gift. Interest is accruing every day (unless you have subsidized loans, which almost no one has these days). That means every day your debt is growing because the interest you owe—but are not paying—is being added to your principal balance. Next month you will pay interest on that interest, too. Ever heard the word “compounding”? Bingo. My best advice is to create a payment plan to do it in five years or less. Then just do it. Get it done!

AUTO SAVE. Even though in debt, you need to save money. You cannot continue to live on credit. I a big fan of any kind of auto pay or auto save. When you set this up, you eliminate the need to make a decision every payday. “Should I save money this week or go to a movie?” “Should I save this week or get those really cute shoes that are finally on sale?!” If you have to make that same decision over and over, pretty soon you won’t. You’ll get lazy, you’ll stop saving and just keep spending.

But if you are auto-saving even $25 a week, you’ve eliminated that irritating decision. You’re on autopilot and that’s a nice way to roll.

Soon, you won’t miss the money. It will be out of sight, out of mind. I cannot stress just how important this is. If you master this concept and turn it into a lifelong habit, you will be thousands of miles (and dollars) ahead of your peers.

Finally, please accept my heartfelt congratulations on a job well done. You made it—not to the finish line but to the starting gate!

The Pain and Pleasure Principle

I don’t care much for pain. In fact I’ll do almost anything to avoid it. I also know that pain can be a good thing.

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The human nervous system triggers a sensation of pain to stop us from doing something that might cause a severe injury and to let us know that something may be wrong.

While we mostly think of pain in terms of physical well-being, I experience a certain amount of pain in parting with hard-earned money. It hurts. I hate the pain of payment. It takes away from the pleasure of the purchase.

Years ago, as merrily I made my way down the path of financial stupidity, I found two ways to avoid the pain of payment so I could fully enjoy the pleasure of purchase. It was like I’d discovered the ultimate way to have my cake and eat it too. I used credit cards. I wrote checks.

To my distorted way of thinking, paying with plastic or writing a check allowed me to enjoy the pleasure of the purchase absent the pain of payment. Payment by check meant to me that I got the goodies and the money was still there in my checkbook or my wallet. Oh, I knew that technically I’d spent it, but who wanted to be technical? It could take days, maybe even a week back then for the money to really not be there. Pain delayed was pain denied—pleasure enjoyed.

So You Think You Can’t Save?

According to Moody Analytics, young Americans have stopped saving money and by young we are talking about adults under age 35—the so-called millennial generation. That compares with a positive savings rate of about 3 percent for those age 35 to 44; 6 percent for those 45 to 54, and 13 percent for those 55 and older.

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Take a minute to find yourself in that statistical lineup. Are you behind or ahead in the savings game? If you aren’t saving you need to be. And if you are? You need to save more.

Here are five of my favorite almost-painless ways that any determined person really can spend less to save more.

Become your favorite creditor. Take an envelope and write your name and the amount you intend to save from each paycheck and place it in the front of your “Bills to Pay” file. Make this the first bill you pay each month. If you use online bill pay, add your savings account as the number one creditor—the most important bill that is paid automatically each month.

Stash a C-note. Crash-save until you have enough in coins and currency to exchange for a crisp, new $100 bill. Stash it into a very safe place known only to you. Whenever you get the urge to purchase something or feel overcome by a case of the “I wants,” tell yourself, OK, but you’ll need to go home and get that $100 bill. For some reason, the urge will pass quickly. Knowing you can if you want but you choose not to has a wonderful preventive effect. You are going to amazed.

How to Win Over Temptation

If you’ve ever stopped by the store to pick up milk and walked out with a week’s worth of snacks to go with it, you know the power of temptation.

Experts say the typical adult is exposed to 3,500 commercial ads in any given day. These hidden persuaders are designed to manipulate our behaviors. With consumer debt at an all time high, it would appear that as a nation we’ve been losing a lot of battles with temptation.

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Photo Credit: jajja

But it is possible to learn how to face down temptation, and win.

Identify the weakness. `Fess up. What are your areas of temptation? Clothes, shoes, collectibles? Movies, food, gadgets? Electronics, crafts, plants?

Stop flirting with danger. If you’re ever going to win over temptation you must stop cozying up to the very thing that causes you to stumble. If you are easily tempted by clothes, don’t spend hours cruising the mall. In fact, don’t even go there unless you have a specific need and a reasonable plan.

Don’t open mail order catalogs. Take them to the garbage and push them way down to the bottom to head off a middle-of-the-night retrieval.

Develop a diversion. Temptation is usually fueled by emotion, rarely by reason. It comes and goes depending on our moods and thoughts, and can come quite unexpectedly. When it whispers in your ear, divert your attention to something equally enjoyable but less injurious to your financial health. For me it’s ironing. You might be more drawn to a book or crossword puzzle. Or a nap.

Simple Rules to Live By

I have a quirk, a kind of brain glitch that annoys me to no end. I cannot easily distinguish left from right. My brain locks up and gives me that infamous “404 Page Cannot Be Displayed” message.

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Of course, I blame this on Mrs. Sailor. It goes back to that day in First Grade when she called on me to answer a simple “left or right?” question. I froze. I did not know the answer.

This was not good for a child who feared punishment for even the slightest infraction. Worse, I didn’t know how I would ever figure it out. No one else in the class had a problem with left and right.

My six-year-old reasoning concluded that the class had learned left from right on a day I was home sick. She forgot to get me caught up when I returned. I would go thirty-five years attributing my problem to a missed lesson. Imagine my relief the day I learned the whys and wherefores of my personal struggle. I have directional dyslexia type of learning disability that can be treated quite successfully with a series of simple exercises.

If I’d only had the courage to say I didn’t understand and to ask for help back then, I might have spared myself a lot of grief.

Perhaps you feel this way when it comes to managing your money. It can’t be that difficult because everyone around you seems to handle their money just fine. It’s as if you were out sick the day everyone else learned the rules of personal finance.

Satisfaction: Your Basic Consumer Right

Statistically speaking, chances are slim-to-none that you consistently avail yourself of the most fundamental of all financial principles—to get what you pay for.

According to Donna McCrohan, author of Get What You Pay For or Don’t Pay at All, only 4 percent of dissatisfied customers let a business know when they are unhappy with a product or service and then follow up effectively until they are satisfied.

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One can only conclude that the rest of us throw good money down the drain for clothing that doesn’t fit right and appliances that don’t live up to their promises. We prefer to cram the stuff into closets and cupboards rather than take the time and effort to request a refund or satisfactory replacement.

When the dry cleaner ruins a favorite shirt we gripe to a friend instead of the dry cleaner’s owner. Or when the coffee grinder doesn’t grind, we mumble under our breath and don’t even look for the customer service 800 number, which might well be printed right there on the infuriating little monster.

I can only conclude from all of this that 96 percent of us complain about shoddy workmanship or inferior service but never get around to requesting the work be redone or negotiating a fair and reasonable adjustment. We give up too soon—or more likely, don’t even get started.

Slow and Steady Wins the Race

If it was easy to get out of debt, no one would have credit-card balances, student debt or personal loans. No one would be in debt.

It’s not easy to get out of debt. But it is possible. And if you are using the correct method, possible becomes highly probable.

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Granted, there are several methods for getting out of debt but only one that offers you hope of lasting success.

I’ve gone down every road that promises a way out of debt and have discovered that most come to a dead end. Others are filled with impossible twists and turns. But there is a way out. I found it. My husband and I are now completely debt-free including the mortgage. Done. Free at last. And that is what makes me uniquely qualified to tell you the best way to get out of debt.

But first let’s identify the roads you should avoid and the reasons why.

FAST AND AGGRESSIVE. This way out of debt is very inviting because it promises a quick and easy shortcut. It goes like this:

What it is. First you make sure you have $1,000 in the bank to cover emergencies. But that’s all you need, so stop saving. Take every dollar you can squeeze out of your life and send it to your debt. Hurry! Fast! And if you pass Go and collect $200, send that in, too.

The rebate check you got in the mail? Off it goes. Tax refund? Birthday check? You know the routine—apply it to your debt.

Caught Between Aging Parents and Adult Children

Every day I drive by a beautiful new assisted living complex under construction close to where I live. As beautiful as this place is, it’s become a daily reminder to me for how difficult it can be to talk to aging parents about their health and future needs.

If you’re 40 or older, you’re part of the “Sandwich Generation,” and likely to fall into one of these categories:

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TRADITIONAL SANDWICH. Those being squeezed between the needs of aging parents, relatives or friends while also supporting and meeting the demands of their own children, spouses and careers.

CLUB SANDWICH. Those in their 50s or 60s sandwiched between aging parents, adult children and grandchildren, or those in their 30s and 40s with young children, aging parents and grandparents.

OPEN FACE SANDWICH. Anyone else involved in elder care.

DOUBLE STUFF SANDWICH. Those whose adult, post-college kids return home to live with their parents for lack of unemployment, direction and or money. Also known as the “boomerangs.”