Life after College: Become a Financially Savvy 20-Something
- Friday, March 23, 2012
To paraphrase a famous quote, “The worst thing about youth is that it is wasted on the young.” No, at 55 years old, I’m not ready for a drool cup and a lap blanket yet, but I’m starting to appreciate the time God gives me more and more. And, as the father of four young adults, I’m becoming more enlightened to their struggles and concerns.
If you’re one of the several million twenty-somethings in America, give me your attention for a couple of minutes because I want to share some thoughts that may make your life easier in all ways: financially, relationally, and spiritually.
Let’s Get Something Straight…
Contemporary young adults live in “looking glass” world. What seems to be up is often down. And what appears to be down is likely to be going up. Charlie Dickens’ opening to A Tale of Two Cities nails it for today’s budding adults — it’s the best of times, and it’s the worst of times. As a group, you are better educated, more fawned over, and pampered than any group yet to come along. Because of the efforts of others, you’ve had the luxury to self-actualize, criticize, and fantasize. Whether through extreme sports or outrageous behavior, you’ve pushed the edge until it is now hard to even discern. You’ve had a lot given to you.
But, on the other hand, you’ve had more bumps and bruises than you deserve. You grew up in an age when many parents were more concerned about building wealth than building relationships with you. Because of radical feminism and its toxic run-off, many of you were born to mothers who wanted it all. They actually believed the laws of time and dimension no longer applied, and somehow they really could have a career and win parent-of-the-year awards simultaneously. So, once you were born, many of you were warehoused in daycares until you went to school.
In school you were exposed to way too much way too quickly. Many of you knew about sex before you could make a six inch bubble with your chewing gum. Some of you lost friends to drugs and bad choices before you had blown out twelve birthday candles. And those who should have been your leaders tried to be your buddies. In a phrase: You grew up in a world where the inmates ran the asylum!
Now, here you are fresh out of college with a mortar board and a sheep skin with no place to go. It seems that every time you inch ahead a couple of steps, life knocks you back three. You’ve already learned that life isn’t fair. Now you’re learning how it can sucker punch you and go off whistling.
In college you missed the course on Real Life 101. They were all too happy to take your money and let you run up debt — but your present $8 an hour job with no benefits isn’t what you thought you were buying.
So, let me take you by the hand and help you step into the deep end of life. To begin with, you must understand the basics:
Your boss won’t base your salary on what it costs for you to live. He cares about what you will bring to his bottom line. Despite what liberal politicians may say to get your vote, the boss doesn’t owe you health insurance — or a car, or a house, or your master’s degree.
Starbucks Coffee is not one of the six basic food groups. Life can be sustained without $5 cups of joe.
You will not be trusted because you haven’t yet proven yourself to be trustworthy. This means that everything will cost more than you expect. For instance, the utility companies will expect you to post a deposit before they turn on the power. You will probably have to pay the first month’s rent and a damage deposit before you move in.
And speaking of moving in, your new landlord will expect the rent on time every month. And, the fine print in your lease agreement really doesn’t say that you don’t have to pay just your half of the rent. If your deadbeat roommate skips — guess who your landlord will be looking at to pay the bill?
And don’t forget the weddings. As one of your college buddies after another gets married they will all invite you to attend — and probably participate in — their weddings. Can you say, “Plane fares, dresses, and rental tuxedos?”
Back to that apartment, congratulations — you get to furnish it.
Now for Some Good News
But, the good news is: It has always been tough for young adults to get started. Granted, different generations have had different challenges. The challenges you face may be different than a previous generation’s — but, probably no worse. If you do the right things you will not only survive — you will thrive! Here are some things I wish someone had told me in my twenties that you may find helpful:
Learn to ignore the secular culture. Today most people live for the moment. The only kind of gratification that matters is the instant kind. If you can learn the benefits of deferring gratification — you will have won half the battle. Remember, your parents’ didn’t always have that furniture, or that nice car, or that big house. They grew into those things very gradually.
Take care of first things first. I encourage young adults to prioritize their spending. There are three important things that I would look at first. Near the top of the list should be a Murphy Fund (an emergency fund for the times you have head-on collisions with Murphy’s Law.) I would encourage you to gradually try to get your Murphy Fund up to about five percent of your annual income. Also, get some good health insurance coverage immediately. This can be expensive, but one unexpected hospital stay can undo you for years financially. Finally, learn to give. Make tithing an early and non-negotiable part of your lifestyle.
Now I know that what I’m about to suggest here is controversial, but I believe it is important to build your credit history carefully and systematically. You might consider getting a credit card for the purpose of building a credit history that will one day help you get a lower interest rate on your mortgage loan.
No, I am not telling you to go out and run up debt!!! If you misunderstand what I’m suggesting here, it can do far more damage than good. But to blame credit cards for our spending problems is a little bit like going into a Burger King, and coming out looking like a Whoper—and, then, blaming Burger King for the problem! The problem is with the person who doesn’t control his own appetite (or, in this case, spending.)
If you do get a credit card, remember the basics. Only get one card. Request and maintain a low maximum spending level (maybe $1,000.) Never spend more than 40-50 percent of that amount in any given month. Always pay the full balance every month — NO EXCEPTIONS! Think before you spend. Studies show that people using credit cards spend more — 12-18 percent more on average. Learn to avoid the urge to splurge.
Do a written budget (in No Debt No Sweat! I call budgets “Personal Financial Freedom Plans.”) Give every dollar a direction — and never deviate.
Begin saving early. Try to set at least 10-15 percent of your income away for long-term retirement planning. If your boss offers a matching 401(k) or 403(b), consider it carefully. If not, look into an Individual Retirement Account (IRA). You can learn more about IRA’s at my website, or at most mutual fund company websites.
By the time you get to retirement, I’ll probably be toe-tagged and horizontal. But that’s okay. Tap me on the shoulder in heaven and let me know how it went.
Steve Diggs is best known for 2 internationally acclaimed seminars that he has presented at nearly 500 churches. Steve can be reached through either of the websites below, or call him at 615-300-8263:
No Debt No Sweat! Christian Money Management Seminar teaches God's people how to use God's money God's way. More at www.NoDebtNoSweat.com.
ReTooled & ReFueled: The Essential Christian Life-Skills Seminar shows Christians how to live for the beautiful bye and bye—while dealing with the nasty now and now. More at www.RetooledAndRefueled.com.
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