Why Some College Students Manage Their Finances Better than Middle-Aged Adults
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Certainly there are many college students, who enamored by the offer of a “free” t-shirt or some other token gift, start digging themselves into debt by signing up for a credit card and using it without concern with how they are going to pay for their purchases. But there are also many college students who live quite “spartan”, living in a cheap apartment, with no car or credit cards, living off their earnings from working a part-time job and going to school. Many only spend cash, and when they run low , look for creative ways to feed and entertain themselves.
On the other hand, there are many recent college graduates who, upon graduating and getting a job, suddenly change the way they were living. This is understandable, as eating ramen noodles every day for a week gets old after a while. But why do many recent graduates suddenly move into a nicer apartment, sign up for credit cards to furnish it completely, buy a new car, start eating out lunch every day and going out for cocktails at an expensive trendy new club, and continue to do so for many years to come? Some people continue to live like this for most of their adult lives, racking up credit card debt for things they don’t need and can’t really afford.
Because they stopped living like college students!
I know this is the case, because I did it myself. For some reason, you start trying to live how you perceive an adult should, with all the trappings, toys, and expenses, even though you normally start out a relatively low salary right out of college. You may be tired of your 8 year-old car and are looking to impress your friends or new co-workers, or that 1 bedroom apartment in the cheap part of town no longer fits the perception you have in your head of how you should live as a young new professional.
Even if you are a medical doctor, right out of school you are not going to be making as much as a surgeon with 15 years of experience. So why try to live like one? The smarter way, to keep yourself out of debt and start building wealth at an early age is to continue to live like a college student, or at least make smart decisions with your money.
Some tips for living like a college student for recent grads or adults with lifestyle inflation:
- Keep your old car as long as possible. Take care of it, and it can last you a very long time. If you don’t have a car, by a used one, don’t finance a new one for 5 + years.
- Don’t move into a high priced apartment or saddle yourself with a condo or house note right away. Even better- move back home for a while. When you do buy a house, buy less than you can afford.
- Don’t furnish your entire apartment with new furniture, art work for the walls, etc, or replace it every two years. Keep your old furniture as long as possible.
- Don’t get caught up in the “young professional” hype- You don’t have to eat out everyday for lunch and dinner or go out for drinks 3 times a week after work.
- Don’t try to impress people with things, or by throwing money around in social situations. It doesn’t really work and is not worth it anyway.
- Max out your 401k or retirement plan. You didn’t have the money before, so you won’t miss it. if you start maxing out your 401k when you first start working, you will not have to worry about saving enough for retirement, I promise you.
- Only replace things that really need to be replaced. No offense to Apple, but you don’t have to have the latest I-gadget, whether it is an ipod, iphone, or whatever the next one will be. Cheaper alternatives will work just fine.
I am in my mid-thirties, and it took me quite a few years to realize that my “perceived lifestyle” was a little to high for my salary early on. Now that I am making more money, I am finally getting to the point where I can pay for my past mistakes. However, it is all the more difficult for some, as many people have gotten married and started having children, like myself. If only I had lived like a college student a little while longer.
Now, where are those ramen noodles…..
Image by Hey joe….
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I think that one of the main things that influences spending is your peers. While a student, you are surrounded by other students all who are likely to have little money and so you all live similar lifestyles. Once you start work you start mixing with people with more money as you may work with people who are paid more than you or they may have spouses who earn a lot. I think that this is when you are likely to start spending money and getting yourself into trouble, especially if you are paying off the student loan as well.
@ Rachel:
I would totally agree with you. I know for a time after i was out of school, i would spend more or less money depending on what friends i was with- either ones who were spending money b/c they had jobs(more) or ones who were still in school (less). Good point.
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