College graduations happened all over the country last week. Graduation day is a day of excitement and relief, and for those burdened with student loans there is also a healthy dose of trepidation. How will you be able to afford the monthly payments? How will you ever pay them off? With student loan averages around $35,000, new grads are smart to be nervous. That’s a crazy way to start a financial life. Which is why I’ve got advice. You are starting your financial life at a disadvantage, but the decisions you make in the next year can make your situation better or worse. Follow these rules and you’ll be on the right path in no time.
Pete’s rule, do not defer your student loans. Start paying them immediately upon graduation. The longer you defer, the longer you are going to be burdened with debt.
Pete’s rule, do your best to save about $1,000 into an emergency fund, as quickly as possible. When life happens, you need to be able to pay for its whims.
Pete’s rule, signup for your company’s retirement plan immediately. You have to create your financial future from day one. You are very unlikely to have a pension, therefore you must create you own destiny. Contribute to your plan, up to the match.
Pete’s rule, if you’re going to live with your parents, leverage your time there to aggressively fund your goals (pay off debt and save money). Don’t leverage your time there to spend $900 per month dining out and going to bars.
Pete’s rule, don’t be afraid to get a roommate. Cutting rent in half, while aggressively attacking your student loans, makes a tremendous amount of sense.
Pete’s rule, don’t buy a car unless you absolutely have to. Driving around in a depreciating asset, paid for with debt, doesn’t make a tremendous amount of sense when you’re already battling debt.
Pete’s rule, when you make a housing decision, make sure your new place is geographically relevant to your job and lifestyle. The shorter the commute, the less money you’ll burn through.
Peter Dunn a.k.a. Pete the Planner® is an award-winning financial mind and a former comedian. He’s a USA TODAY columnist, author of ten books, and is the host of the popular radio show and podcast, The Pete the Planner Show. Pete is considered one of the foremost experts on financial wellness in the world, but he’s just as likely to talk your ear off about bass fishing.