College graduation is this bittersweet moment in life where you are finally free to go be an “adult.” But, guess what?! You are totally not ready to be an adult. If you are a college graduate with debt, there are six financial steps you need to be taking.
I did not do these things and I am definitely paying for them now.
After graduation, you are looking into starting your adult life. This often means:
- New car.
- New House or Expensive “grown-up” apartment.
- New pet to go with the new life.
- New clothes to go with that fancy new car and job.
- New credit card to build up your credit now that you are a true adult.
These are all great things to do for yourself, but guess what? If you are in debt, you can’t afford any of this stuff!! This is the new graduate trap. We all fall into it.
New grad equals new fancy life you definitely can’t afford.
When I graduated from veterinary school I had $230,000 of debt. What did I do? I had two dogs, a cat, a new husband, a nice new rental, husband had a new car, we bought a house we couldn’t afford and lived like we were on a “doctor’s” salary.
So freaking stupid. Do not do this. We screwed up, big time.
Here’s the thing about being a new graduate. It is going to feel like everyone around you suddenly has this upgraded lifestyle, and you are going to want to do this as well. You are going to want to do “all the things” that adults do.
Don’t do that! Instead, follow these steps for new graduates if you have debt.
6 Steps For College Graduates With Debt:
Step 1. Get on a Budget.
This was probably the dumbest thing I didn’t do. If you have debt, heck even if you don’t, you need to be living on a budget. There is no way around this.
And the good news is, you are a college graduate. This means you are definitely intelligent enough to run a budget. Your third-grade math skills are about to come in handy!
When I first heard about a budget, I immediately thought, “oh man, this is really going to suck and I am not going to have any fun.” I had this idea that a budget was going to be restricting and suffocating.
Here’s the thing about budgets. YOU create YOUR budget. This means you are deciding where you want your money to go. You are ordering yourself around. No one else is designing a budget to torture you.
Plus, all a budget is doing is guiding your money where you want it to go. It is a written plan for your money. The very best budget is a zero-based budget.
The zero-based budget makes you decide where every single dollar is going to be used for the month. There is no “extra.” This may mean you designate money to go into savings, and that’s great, but you have to make sure every dollar is going somewhere that you have determined for it to be.
If you have never done this before, the budget set up can seem like this daunting and overwhelming task. Believe me, when I say, it is super simple.
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Step 2. Ignore Your Friends.
Friends are awesome because they are your support system and your sounding board for what’s going on in your life. When you graduate college, whether you realize it or not, you are going to be paying attention to what your friends are doing.
There will be this little voice in your mind telling you, “Amanda got a great job, has a nice apartment and is living the life I should be living. I need to be like that too.” There will be a conversation of self-doubt and criticism based on the comparison.
Do not pay attention to what your friends are doing! You are a new grad with debt. You have no business putting on appearances that you have lots of money. You don’t!
Unless you have friends who are going to be super frugal and focused on debt payoff, ignore what they are doing! You do not want to be like them right now.
If you take care of your debt now, you will be the person they want to be in 5-10 years. They will wish they had done what you did and taken care of their debt straight out of school. Guarantee it.
You do not need to keep up with their lifestyle choices. Nor should you feel bad if you can’t afford to eat at restaurants they want to go to. You need to make the smart decision for your future and focus on debt payoff.
Step 3. Get a Career.
When you are just coming out of college, there is a high probability you will not be using your degree you just went into debt for. Regardless of using your degree or not, you need to be finding yourself a career that has the potential for growth.
It’s amazing if you can find a great career using your degree, but if you can’t, do not settle for a minimum wage job waiting tables (unless this is in addition to your main job). You need to be looking for a job that will give you growth potential.
Even if this job is not what you went to school for, look for something that if you fell in love with it, you could make a career out of it. Your mind and your bank account will thank you.
You do not want to be a new grad, in debt, working a minimum wage job unrelated to your degree, with zero prospects of growing with the position.
A career will also have benefits, retirement options and mentorship available to really help you develop yourself and become the best in your field.
Do not settle. You are a college graduate and you are intelligent, driven, focused and you have the grit to make something of yourself.
Step 4. Do Not Upgrade Your Lifestyle
There is this feeling when you graduate of needing to suddenly “have it all together.” I remember being in my mid-twenties and thinking I was super behind because I was still in school, unmarried and unsettled. I was moving around and nothing really seemed stable in my life.
It is such a weird time because you want to be an adult, but you aren’t quite there yet. I feel like your twenties are when you get to practice some things for your adult life that you will have in your thirties.
I remember moving into my third apartment in three years, looking at all of my stuff and feeling embarrassed. Everything I owned was a hand-me-down from someone, it didn’t match and it was pretty banged up.
I longed for that “cute” apartment where everything matched and was shiny and new. But, I definitely could not afford that kind of living.
If you are feeling this way and feel like you are ready to stop “living like a college student,” if you have debt, you definitely aren’t.
Instead of feeling embarrassed by your possessions, look at them as badges of honor. Once we started hammering into debt payoff, the things we didn’t replace or spend money on actually became a point of pride for us.
Shift your mindset to be proud of that beater car, be proud of the patio furniture you use for your dining room table, be proud of the clothes you have had for 8 years that you still wear. Find joy and self-confidence in the things you probably will replace someday knowing that they are helping you get out of debt right now.
This can be a really hard mindset shift because the world tells you new is better, but you have to ignore all of that outside messaging. When you have debt, new is not better. New will hold you back from becoming debt free. New will keep you in chains to your debt. New will cost you your future.
Do not upgrade your lifestyle just because you graduated from college. You have not earned the right to upgrade your lifestyle until you are out of debt.
Step 5. Get a Debt Payoff Plan
Once you have your budget set up, you have to have a plan to get out of debt. Without a plan, you will just have an idea to get out of debt but you don’t know how.
The best debt payoff plan is the debt snowball. This plan helps you tackle any amount of debt and feel confident about making progress.
As a new graduate you should be:
Organizing your debts:
- Know who you owe money to
- Know how much money you owe
- Have online accounts set up with each lender
- Keep your passwords documented somewhere
Listing all of your debts from smallest to largest (ignore interest rate).
Write down the minimum payments for each debt.
Then you will begin to pay minimum payments on all of your debts, and every extra dollar you have you will throw at your smallest debt until it is paid off.
Once you have your first debt paid off, you will take that debt’s minimum payment and add it to the next debt’s minimum payment. This is how you grow your “snowball.”
Then you will focus all of your extra income on paying off the second debt until it is gone. Once it is, then you roll that payment into the next debt’s minimum payment. See how this builds?
If you can stay focused on your debt payoff plan, you will become debt free so quickly! Even if you are staring at a mountain of debt (that was me), it is totally doable. This plan breaks it down into manageable steps so you don’t feel overwhelmed.
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Step 6. Live Below Your Means.
This can be a tough one because everyone has different standards of what living below their means looks like. If you are focused on debt payoff, you will be living way, way below your means.
This will help you pay off debt so quickly and then you don’t have to live like that anymore. It isn’t a permanent thing.
When debt payoff is your focus, you will want to squeeze every penny out of your budget. You cut your expenses down to the bare minimum. You will work extra jobs to increase your income. Your sole focus is to get out of debt and the fastest way to do that is by living below your means.
Is this going to suck for a while? Absolutely! But, instead of dreading it or fearing it, just embrace it. Decide that this is where you are at and get excited about what you are about to accomplish.
This is just one more thing in your life you are going to conquer. Make a decision to get out of debt and let nothing stop you. This is another adventure in your life and you need to just embrace it. You are going to crush it!
If you can be joyful through the process it is going to seem shorter and you will get through it faster than if you are resistant the entire time. There is a big difference between being joyful versus being frustrated as you are making sacrifices for debt payoff.
I forget where I heard this, but this is a great illustration of the two types of people in the world:
The first person walks into a room full of manure and complains about the smell and how awful it is.
The second person walks into a room full of manure and says, “There must be a pony in here somewhere!”
Decide to be the optimistic person looking for the pony. Be joyful about the process. Enjoy the sacrifice knowing it has a bigger purpose for your future. Do not beat your head against a wall by being resistant to the process. It isn’t going to serve you well.
Make sacrifices, get out of debt, and start living your best life.
If you are a college graduate with debt you are going to have an amazing life. But, first, you need to get your finances in order and stop trying to live like everyone else. Get yourself on a budget, find a career path and work your debt payoff plan.
You will have the life of your dreams, it just isn’t going to happen the day after graduation. Have some patience and know if you do these steps now, you will be able to live however you want in the future. You’ve got this!
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