An economic survival guide for recent college grads
Expert advice for Generation Y, which will likely have tougher time financially than their parents did.
from the April 23, 2007 edition
Page 2 of 3
"Plan out what your expenses are and what you need to do to keep to that budget," she says.
At Robert Manning's website, creditcardnation.com, the Rochester Institute of Technology professor has a free budget calculator. The program helps students see where their money is going and where they can cut back, he says.
)
"You have your needs, your wants, and your desires," Dr. Manning says. "There's public transportation, the used car, or a BMW. If you want to go with your desires in one area, that's fine. You're adults, now. But it means you'll have to save in other areas."
When budgeting, guessing at expenses doesn't help. If you aren't sure how much you spend on food each month, find out.
"Often, people over- or underestimate how much they make and how much they spend," says Ritter, who, on top of teaching, is also a CFP for T. Rowe Price. "I have my students write down and track every purchase they make for a month."
The class found that unexpected costs frequently pop up, throwing off their plans. These surprises weren't catastrophes; they were everyday events – holidays, friends' birthdays, car repairs. These moments won't break the bank, Ritter says. But if you're not prepared, they will suck up savings.
Of course, paper-and-pencil budgeting is not for everyone.
"I don't have time to plan everything out," says Mr. Jones, also a CFP. For him, keeping expenses low is about finding alternatives.
"The biggest money drain out there is Friday and Saturday night," Jones says: eating out, parking, movies. "No one wants their social life to suffer because of their wallet," he says. "One trick I learned is: Always eat at home. You can meet up with your friends later, but save yourself some money and just cook dinner."
Once you've tackled mandatory expenses – rent, insurance, etc. – Ritter says the next target is the credit card bill.
"If you're not paying off your credit card in full every month, it means there's a broader problem with your spending habits," he says. Paying off a purchase over time can add 20 percent to the cost of an item, he explains. "Think: Is it worth paying more than the price tag just to have it now?"
RSS feed
