Done With College? I Wish I’d Known These 5 Things Before Graduating
Ahhh, the college days, aren’t those the days to remember? Pulling all nighters, going from class to a part time job and vice versa, eating free pizzas or having the munchies at 2 a.m. on a Thursday night – these were all part of my college experience. Then after an enduring time of hitting the books, it’s graduation day – it’s like a wedding ceremony that seals the deal and you now have a ticket to a better life with the possibilities of a higher paying job. But there are key things that no one might have taught you along the way.
I don’t live with regrets, but just for this one time, if I could go back in time to May of 2000, my graduation time, and give some advice to myself, I wish I could tell that undergrad the following: Hey buddy, it’s me, I mean it’s you from the future. You’ve always been obedient, so listen to me right now without questioning and after this, do question everything else in life, coño!
1. Keep housing costs down
Now that you have graduated from college you have to watch out for lifestyle inflation. If you don’t, you’ll increase your spending as your income goes up and it will be harder to save or get out of debt if you follow that path. Ultimately, you’ll be stuck in a rat race just to pay the bills until you’re old, fragile and can barely move, let alone explore the world through travel.
You’ll no longer be a broke college student, and with a bigger income, will come greater responsibilities. You’ll have a decent job that signals you can get your own apartment and spend more on things that you’ve been deprived of. And yes, I think you should splurge every now and then and celebrate the milestones, but keeping life simple at this point is more important than ever. Every dollar that you can save at a younger age has the potential to grow for many decades to come. Instead of moving out on your own, try living with your parents for as long as possible. Now that you’re an adult and can get along better with them, why not try to minimize expenses and spend more quality time with them while you’re at it?
Once you find that great job, continue to keep your life simple. Don’t be a fool by falling into the American Dream trap. Buy only as much housing as you need and you’ll get to financial independence sooner. Don’t ask me what that is, just continue to keep the simple life and housing costs down for as long as possible after college. I don’t want to spoil the surprises that are coming your way.
2. Minimize transportation costs
Unfortunately, you won’t be able to rely on public transportation to get to your first job out of college. Since you were broke while in college and didn’t save much, you just won’t have enough money sitting in a bank account to buy a car to get you to work. You’ll need to borrow money. Only borrow the least amount possible to buy a used car, and most importantly, pay it off right away! Whenever you’re in the market for your second vehicle and can afford to buy in cash, always buy used, again, don’t be a fool by falling for the new car smell and the upgrades every four years. A new car will leave 20% of its value at the dealership the minute you drive it off the lot.
Some might tell you that you’re better off getting a low interest loan and investing the funds. Here’s why you should go the cash route:
a) A car is an expense, not an investment, a depreciating asset at best. It shouldn’t be a part of your investment strategy. Pay for it cash and be done with it. You’ll feel good to know that if you lose your job, you won’t run the risk of a repossession by not being able to keep up with the monthly payments. This can happen if you lose your source of income and the money that you decided to invest instead of paying for the car goes south due to a bad economy. Now that you’re out of college and don’t have to pull all nighters (they weren’t good for you anyway), you’ll appreciate how well you can sleep at night without the thought of owing money.
b) When you buy on credit, you’ll spend more than you would otherwise. Don’t believe me? Next time you’re in the market for a $20k car, try taking that money cash with you to the dealer. If you want to do this exercise on a smaller scale, try bringing $2k for that big screen TV you’ll want at some point. Let’s see if you end up parting with all that cash. Hence, you spend what you need, and not a penny more, when you pay with your already hard earned cash.
3. Max out your 401(k)
While you were in school, you didn’t learn much about this savings vehicle, called a 401(k). As soon as you land a job that offers a 401(k) plan, enroll in it and max it out! This is a big f-ing deal because it will set many things in motion for you. Oh yeah, you’ll hear that phrase again in politics. A key to becoming wealthy is for you to take advantage of all the tax-advantaged accounts available. Many employers will match a certain percent of your income contribution to a 401(k), but your path to financial freedom will require you to go beyond that and increase it to the maximum allowed by the IRS. After a few years of working, you’ll realize that a 9-5 is not something you want to do for the rest of your life. Starting to save early will give you a big head start.
4. Eliminate all debt!!!
You might be confused on whether to max the 401(k) or pay off the student loans first. I can’t give you such type of advice because you’ll need to figure that one out yourself. I’d say it’s a matter of preference for the individual. If you’re doing one or the other, or both, you’re already on the right path. There’s no need to live with a student loan or any loan forever. Also the interest deduction is phased out as your income level goes up which makes keeping it around less appealing as time goes by. Pay all that shit off: credit card debt, student loan debt, and anything that ends in “debt” as soon as possible and move on to investing in buying your time back.
5. Redirect savings to the FI bucket after all debt is paid off
After all your debt is paid off and you’re maxing out your 401(k), you can relax a little. You now have your own “undergraduate degree” in personal finance. This is the stuff that they didn’t teach you in school. At that point, life will be looking better for you. Marriage might sound like a good idea or moving to an apartment of your own, or maybe with a roommate, if you live in an expensive city. You’ll learn that material possessions don’t bring true happiness. You’ll be ahead of your friends since you didn’t follow their foolish spending habits. And you’ll get value for the experiences or things that you decide to spend your life energy on. Now you can pursue your master’s degree in life: your FI proposition. Work on finding your purpose in life, do your FI numbers and continue saving and investing.
And, a few more things you may want to know:
- Bush will be staying in office for another term – whaaaat?!
- You’ll see the first black president within the next decade
- Those apples that you adore will become huge creating smart products
- Some kids from the Bronx are going to make Bachata the hottest Latin music worldwide and you’ll get to appreciate their raw talent before they make it big
- Your favorite artist will come out of the closet
- You’ll bring the Latin flavor to the early retirement blogging community
- And last, but not least, you’ll meet a hot Russian turned-Latina who is going to change your world around… Buckle up and enjoy the journey, boy!
If you had a chance to go back in time, what advice would you give your younger self?