Maybe Beyoncé was on to something…But even banking on a sugar mamma or daddy doesn’t allow you financial independence. Here are some ways to keep your head above the choppy waters of CASH, CREDIT, AND DEBT.

words_erin lockwood
contributing research_sarah chase

As naïve, hopeful students, we believe that our college diploma equals some great post-graduation cash, coming from our new job in a beautiful building with lots of other cool, young people. But the reality is that you will most likely not be surrounded by recent graduates, or work in a high-tech, designer building. At best, hope for employment and a steady form of income.

A rude awakening that many fresh-faced graduates encounter is the inability to afford the lifestyle they were used to as students on their parents’ tab. Frequent dining out, alcohol expenditures, shopping to relieve test anxiety, even unlimited access to a “free” workout facility—these luxuries we take for granted are simply that—luxuries. Failure to make this realization and plan accordingly often results in debt. Once that first paycheck arrives, rent and food become more important than mani/pedis and track jackets.

While this isn’t meant to be a buzz kill, it should serve as a reminder to prepare mentally for the financial changes that will come your way. If not right after graduation, then someday—there is no excuse for asking Mom and Dad for money to buy groceries as a 33-year-old.

First things first—learn to budget your money. It allows you to see exactly how much you are spending, and on what. Start off by simply keeping a record of where the cash goes, how much, and how often; you can better assess your needs and determine a realistic budget that allows for basic necessities and perhaps a few vices as well. Categories should include food (groceries and dining out), going out (what a typical night costs you, from cab to drinks, including tips) gas (probably the most painful category; consider going green and walking or riding a bike. Check out pg. 36 for more info), bills (phone, car, tuition, etc) and extras (shopping, parking around town, movie tickets—it all adds up). Getting into this habit of tracking and budgeting your money will give you a sense of confidence when you are on your own. For the computer savvy, Quicken personal finance software, is a great program to help you keep your numbers in line, without the complications of Microsoft Excel. You can plug in how much money you have spent, whether on a credit or debit card and control your purchases.

Extra moneymaking tip: Start a 401K plan at work. ASAP. Because you need money to rely on for retirement. If you start early and keep adding to that 401K, you could have 1 million dollars saved in about 45 years! And don’t forget about putting some money into a savings account. A good rule of thumb is to put 10% of each paycheck into that savings account. This “extra” money will help pay for vacations, unforeseen expenses, and even help keep your head above water should you find yourself between jobs.

But back to college life. The idea here is to practice being frugal, which is being economically sparing. One of the best places to put this in practice is at the grocery store. Seasoned coupon clippers will tell you that you can save as much as $20 on groceries by picking out the deals.

Opt for store brand rather than name brand; often the only difference is price. Shop with a list so you don’t overload on unnecessary goodies. This will help you remember what you do need and save you an extra trip. Buy items that will last you longer, like soups or frozen meals, and boxes of pasta. Leftovers are often one of the joys of cooking, and can be considered a free meal. On that note—take home the leftovers of a big meal if you’re dining out. And don’t forget about the first two meals of the day: Breakfast and Lunch. A box of cereal goes a long way, and eggs are a healthy and quick meal at any time of day. Brown bag your lunch instead of eating at Starbucks or the food court. It could save around $125 a month and not to mention, is also much healthier.

Lessons to Learn

Oh, the credit card. You never knew plastic could be so wonderful —until your bill comes. For careful spenders, this shouldn’t be a problem, simply don’t buy things you can’t afford. If you can’t pay for it right now, you probably won’t be able to pay for it in 20 days. But when it does show up, pay it off in full, and on time. Doing so will build credit in your name, something that a debit card can’t offer. One way of ensuring that you stay within your means, is to keep your credit limit low, that way, you won’t make purchases beyond your means and budget. If you do not pay your own bills, consider applying for a credit card in your name, with bills paid by you (not your parents or anyone else). Use it only for small purchases, like gas or small meals. Paying off $50 of the $50 credit card bill is paying 100%, and that is good. Accumulating and paying bills on time and in full is the best way to earn good credit. Bad credit equals high interest rates on credit cards and a higher mortgage rate when it comes time to purchase a house. And without any credit, you may be denied the keys to a new apartment or condo because they cannot evaluate you as a paying customer. So get some credit, and make it good!

Saving for the Future

Now that you know how to save for next week, next month, and even next year, you are ready to start saving money for the road ahead. At this point, think of savings as money accumulation, rather than money you can’t spend. There are three great ways of growing those funds; stocks, mutual funds, and retirement plans. Here’s the scoop, according to the Bank of America “Student Handbook”:

Stocks: Stocks represent partial ownership of a corporation; your money is invested in corporate trading, which can increase dramatically if stocks are up, or take a nosedive if stocks are down. Wise investing with the help of a brokerage firm or an adviser is the best way to go about this. It may be something fun to try, but unless you know what you are doing, you might as well gamble it.

Mutual Funds: A way of “diversifying” your investments…your money is invested for you by a professional investment advisor, who uses the money to buy stocks, bonds, and other investments. You receive monthly, quarterly, or semi-annual updates on your investments. Because all of your eggs aren’t in one basket so-to-speak, like they tend to be with the stocks, you have better opportunities for financial growth. However, there is as always, risk involved.

Retirement Plans: Think personal investment—retirement plans help you set aside money for yourself, like a savings account. An IRA (Individual Retirement Account) allows you to contribute money in installments; a 401(k) lets you contribute to a savings plan through your employer, where the money is taken from your paycheck before taxes. Not only do you save money on taxes, but some employers even match what you put in to your 401(k) to a certain percentage, so more money for you…and your grandkids!

Be Who You Are

Another major problem many students overlook is identity theft. We’ve all seen the witty commercials, but many of us are too naïve to believe it could happen to us and therefore don’t take the proper precautions to protect our finances and personal information. You can help keep yourself safe by shredding all financial documents—not simply throwing them out. If you must, throw them to the flames. Any document with your Social Security number, full bank account number, and even address should be disposed of properly—think old pay checks, store receipts, financial statements, etc. Never send your personal information out by email or over non-secure websites. When in question, a reputable organization should have a phone number you can verify with.

If you suspect your credit card is lost or stolen, call your bank immediately and put a hold or cancel on it, and make sure you verify the most recent charges. Most companies are extremely helpful when it comes to dealing with identify theft or fraud.

And if all this is getting you down, just remember: the best things in life are free. <<