Youth and Money
Financial Realities for College Grads
The joy of graduating from college can quickly disappear once the graduates understand that they are on their own and the bills are starting to pile up. Graduation usually marks the point at which grads find their first real jobs and take on the full responsibility for their financial future – and that can mean failure or success.
They soon realize that there are a myriad of financial burdens including rent, car payments, car insurance, utility bills, internet services, cable, groceries and the list goes on. The wonder and awe at the amount of money they are making (perhaps for the first time in their lives) at their new job diminishes when they discover the deductions for benefits, payroll taxes and income taxes. The life style they started based on their gross salary is usually too elaborate for their net income.
But the worst thing that the graduates can do is then start using their credit cards to help maintain that lifestyle. It is then that the decline into debt happens very quickly and, seemingly, without warning. According to statistics the typical graduate already owes $3,262 on credit cards at the time of graduation! And most are also in the process of paying back school loans, which average close to $20,000. Here are the typical “eye-openers” for recent college grads and some tips on how to plot a course to avoid these financial land mines.
Bills, Bills and More Bills
There are more than a few college grads that can remember their mothers or fathers pouring over a kitchen table full of bills – and muttering to themselves during the process. Of course, most never gave it a second thought. Get ready for a dose of reality. College grads dream of beautiful apartments with topof- the line audio/visual equipment and new furniture and there is also the new stylish car that they have been fantasizing about. But what about food, gas for the car, utilities, clothes for the new job and a few extra bucks for a night out on the town? There are alternatives. Grads can use public transportation, take on a few roommates to help with the monthly bills and reach out to alumni in their local area for suggestions. They can contact the alumni affairs office at their college to see if there is a local chapter in their vicinity.
Be Aware of Your New Income
Many college grads are starry-eyed at the salary they will be making at their first job. They should do their homework and find out the difference between the gross and the net pay they will be receiving. They can then build a budget according to their “true” salary.
Car Insurance – Surprise
The days of mom and dad paying for car insurance are just a memory for most college grads. Even if students are paying for their own car insurance while they're in college, they may be benefiting from the family's multi-car and multi-policy discounts. Since many graduates relocate away from their home, car insurance rates may come as a major shock. Also, college grads gravitate toward new and flashy vehicles being produced and don’t realize the expense of insuring those cars. If a policyholder allows another person -- a roommate, brother or sister, or a boyfriend or girlfriend -- to drive their car regularly, that has to be revealed to the insurance company and can affect the premiums, which adds to the financial burden.
An additional issue for insurance companies is the amount of debt a college grad is already carrying. In some states, if the debt is substantial, the college grad’s rates can increase due to the chance of deliberately burning their car or setting up a false carjacking scenario in order to collect the insurance.
More Insurance
The majority of college grads rent an apartment or a house but forget to obtain renter’s insurance. The landlord may have insurance but it is usually for the structure and does not protect any personal belongings – which means the new TV, stereo system, computers and the furniture, not to mention all the other objects that will not be replaced if damaged.
In some states, if a number of people rent an apartment together, they can't get a policy together, and some items, such as high-end electronic equipment and computers, might be difficult to insure. Also, college grads should be aware that most renter's insurance policies cover what an item is worth today, not replacement cost. The reality is, what's a 3 or 4-yearold computer worth if it is destroyed? Grads should do the research and see if renter’s insurance is right for them.
