Monday January 14th 2008, 10:25 am
Filed under: People, Personal Finance, Student, Student Loan, personal finance bloggers
“Convenience food is gross and not particularly convenient, but it’s basically like crack–”
Are you graduating this spring? It’s not too early to brace yourself for the so-called “Real World” — and not the one with the MTV soundtrack! What’s it like? What should you do to get ready?
I had the pleasure of speaking to recent graduate Melissa Eastlake. She’s one smart grad and like you has a lot to consider when it comes to the financial aspects of starting out. Here’s her take on entering “Big Girl” or “Big Boy” Land…
Melissa, you recently graduated from college. Did you have that terrifying moment — the one where you get your student loan bill and think… WTF? How am I gonna pay this…?
The exit counseling run by my school’s financial aid office was, to say the least, not the best day I’ve ever had. That was the first time I saw my estimated payments–and only for my government loans, my private loans weren’t even included. I didn’t work out what sort of debt burden I could expect to handle until the end of my senior year–and by then, of course, I was stuck with it.
Luckily, though, that was at exit counseling in April, so I had time to figure it out.
So, seriously, how are you gonna pay it? What’s your biggest challenge with respect to your student loan debt?
When I set up my budget, after I landed my job and got my first paycheck, I started budgeting for my debt payments even though I was still in grace. I didn’t actually make payments–I used it to pay back a friend and boost my savings–but I didn’t want to get used to living on that money and then feel pinched when my grace period ran out. Since the minimum payments take a little over 20% of my net income, that would have hurt way too much.
I’m surprised how easy it is to psych myself out of my student loan payments, massive though they are. Student debt can feel so invisible as it accrues–your parents handle a lot of the paperwork, you’re not making payments, your school is telling you not to worry because it’s an investment in yourself, and hey, everybody’s doing it. At first, being faced with the reality of all that debt was a huge shock–but I never let myself feel the money come in, and since those payments are automatically debited, I don’t really feel it going out.
It’s only when I look seriously into savings plans that I get frustrated with those huge payments, and realize again that I should be working harder at amassing prepayments and negating some of the debt. Coming up with a reasonable prepayment goal and finding the discipline to stick to it is my biggest challenge right now.
So, in addition to your student loans, what other financial challenges have you discovered upon entering, as Nina [editor, Queercents] puts it in your introduction, “Big Girl World”?
First of all–never in my life have I been so tempted to spend seven dollars a day on completely unappealing sandwiches as working in an office. Convenience food is gross and not particularly convenient, but it’s basically like crack–sleep too late to make yourself a lunch on Monday, then Friday you’ll wake up in the gutter, out sixty bucks from buying bagels, subs and Snickers bars.
Coming up with plans for major expenses and savings definitely took a lot of thought at the beginning, but that means I don’t have to think about it now. Really, what’s hardest for me is adjusting to the idea of having enough. Whenever an expense or a goal changes and I run the numbers, I’m always just shocked that everything adds up. Conventional PF [personal finance] wisdom likes to remind people to remember their standard of living “in college” or “at thirty”–I assume what they mean is the way I felt when I told my mother, “They just keep paying you!”
What would you recommend others do prior to graduating to make the fiscal part of starting out easier?
First and foremost, save. Graduate with a cash cushion of a couple thousand or more–maybe less if you have a job lined up right away or plan on moving back in with your parents, but you should probably save anyway. My roommate and I changed our post-graduation plans in April, both of us suddenly requiring a healthier cushion, and I know at least one person who had to bail on a last-minute plan because she didn’t have enough cash. My money ran out on me just a scotch too soon. You don’t really want to start out life in the Big Girl (or boy) World by asking your parents for money or, worse, going into debt. Lame!
Do what you can to pay off or avoid accruing credit card debt, and figure out what sort of debt burden you can expect to afford as you’re taking out student loans. Check out the personal finance blogs–a lot of them were started by people who were in serious trouble with spending and debt, and many of those people started getting in trouble in college. Just start out ahead.
[Editor's note: Melissa recommends you check out personal finance blogs to keep motivated, too. Two she mentioned are The Simple Dollar and Get Rich Slowly.]
Start building your Big Girl (or boy) Wardrobe early–don’t go too crazy buying suits if you might end up at a tech company that allows jeans, but start picking up business and business-casual clothes as you shop throughout senior year, and you will be very happy when you’re unemployed and interviewing.
[Editor's note: watch for Geezeo's upcoming personal style & money interview!]
The best thing I did for myself in college was work at internships–I did three, and got the first one by cold-calling the organization I wanted to work for. Be brave and persistent, and you’ll find some sort of awesome experience. It’s the only way to get acquainted with specialized software for your career field and get recommendations from people on the same page as your future bosses. In my experience (and I admit I’m not an HR director or career counselor) any sort of corporate experience is better than even the best campus leadership experience.
Do you think you were sufficiently prepared (by your family, peers, or school) for the realities of managing your finances? Sadly, I don’t think many of us are taught to be financially literate… I assume with your involvement at Queercents you keep educating yourself about money. What are some ways that you continue to learn, or things you’ve been surprised to discover?
My formal financial literacy education was spotty at best. Maybe a quarter in a high school math class, a seminar during college orientation… nothing that ever made such an impression that I’d be able to remember it now! I also can’t think of any conversations I’ve ever had with my parents about managing money, but I seem to have done all right so maybe more sense was pounded into me than I think. I started to become seriously educated about personal finance in college, when I became frustrated with my cash flow and, I don’t know, maybe googled “budget” or something exceedingly glamorous like that. I opened an online savings account and committed myself to watching it build.
I think most people work that way–you absorb however much you absorb by whatever inexplicable osmosis, and then have to educate yourself when you have a problem. You hope it’s a little one like making a budget instead of a big one like bankruptcy or crippling credit card debt.
Being involved with Queercents has taught me so much about finance–I closely follow news articles and blogs that I wouldn’t focus on so much otherwise, and spend more time mulling over the ideas. I think both more and less about my money–I feel confident in making goals and structures, and then I can put it out of my head and just enjoy what I have instead of worrying! With the national savings rate and median net worth so dismal, it’s surprising and continually confounding to read so much information that concludes, really, you just have to get around to doing it.
Any ideas why fewer women are willing to openly discuss finances or educate themselves about money?
Where are these lame wallflower women I’m always hearing about and why haven’t I ever met any of them? Of course, you don’t have to go very far back to find times when fewer high-income jobs were available to women, no investment advice was targeted to them, it was never suggested that anybody but the man of the house should handle the money, and even family advice passed to sons. In some ways, right now is still those times! But even then, don’t you bet a lot of 50’s housewives balanced the household budget and knew just as much about what was going on as their husbands?
Doesn’t most reputable research suggest that women and men, especially young single women and men, do tend to handle their spending and savings differently but that they both have strengths and weaknesses? I seem to recall hearing that women tend to wait longer to invest but do better when they do, because they buy and hold longer-term. I admit I haven’t researched it in depth. Generally, I think being sane about anything–politics, your body, the media, and certainly money–is sort of an uphill climb for women, with all the mixed messages and oppressive standards that come at us. However, I know lots of intelligent, self-assured young women who are on top of their finances all on their own.
If you don’t mind sharing, what are a few of your short-term and long-term financial goals?
In the short term, my goals are all about maintenance: stay on top of my payments and expenses, don’t get into consumer debt, and save for a car. I’ll start 401k contributions when I get a match. The eerie feeling about setting up your life post-graduation is that you’re living the long-term goal. I haven’t carved out new ones yet–I can’t even imagine the expanses of time that “long-term” now covers. I don’t want to still be paying on my student debt in 25 years, so I will need to make a plan to eradicate it before then. I imagine someday I’d like to retire, so I’ll set aside money for that, and also that someday I’ll want a house or to start a family, so I’ll keep saving outside of retirement, too. After that, I guess my short-term goal is to set long-term goals!
Best money-related tip?
Track your spending, all of it, at least for a little while but I recommend forever. You’ll be shocked, and then comforted.
Best money-related lesson learned?
Be brave: stop worrying and just start.
Final thoughts?
Financial planning doesn’t have to be hard or time consuming, but it pays off enormously in money, time and peace of mind. Educate yourself, make a plan, and follow it through.
Couldn’t say it better if I said it myself, Melissa. Sounds like you’re on your way! Thanks for being a part of our blog and sharing your experiences. You can find Melissa at Queercents, the most comprehensive personal finance site for the lesbian, gay, bisexual and transgender (LGBT) community…and a great resource for the straight community, too. Make sure to check out Geezeo Groups and Goals, too. It’s easy to connect with people who share your background, interests, and financial goals!
January 14th, 2008 at 5:55 pm
[...] at making your seemingly endless monthly loan payments, I’m going to send you on over to this post on Geezeo. Melissa Eastlake is a recent college grad who is figuring out how to handle loan [...]
January 14th, 2008 at 5:57 pm
Great interview Melissa! It is so refreshing to hear someone, especially a young woman speak refreshingly candid about the “real world” coming out of college.
It seems eons ago since I was at this same threshold, but somehow I had enough education and smarts, and built in saving attitude to make a strong start. Even so, it is a tremendous learning experience and there is a reason they teach you in accounting class — ‘be conservative’. That is because finances can have their surprises over time. Be prepared and you won’t be surprised (or at least you won’t be up a creek).
January 18th, 2008 at 12:50 am
[...] unknown wrote an interesting post today onHere’s a quick excerpt [...]