The following article is the second post in a two-week series on “Graduating From College During a Recession” presented by the members of the College Money Network. You can get all of the posts in this series and more by subscribing to the College Money Network RSS feed.
So you’re about to graduate from college and start your first job (if you’ve been lucky enough to find one in this tough job market). After years of paying to go to college, the tables are finally turning. You’ll be the one getting paid instead of the one doing the paying.
Getting your first paycheck is an exciting experience. What are you supposed to do with all of that money? Or maybe this is a better question. What aren’t you supposed to do with all of that money? With the economy in a recession, the decisions this year’s college graduates make with their money right out of college are more important than ever. Here are seven stupid ways recent graduates waste money after college.
1. Live by yourself.
We all know how difficult it can be to live with other people. I think that’s one of the greatest lessons we learn from college, so once college is over, it’s tempting to get a place just for yourself. The problem is that living by yourself is more expensive than sharing a place with a roommate or two or three or more. Not only is rent more expensive for just one, you also miss out on the money you’d save if you were splitting the bills with roommates. Over the course of a year, this can add up to thousands of dollars that you could have saved.
2. Buy a new car.
You just landed your first real job, and you need a way to get there during the week. Why not do it in style? Buying a new car is really tempting after college, but you can save a lot of money by buying a used car or sticking with a hand-me-down from within your family. I’m not going to turn any heads with my parents’ old Honda Accord, but I bought it from them for thousands less than I would have spent on a new car.
3. Buy a new wardrobe.
Gone are the days when you could oversleep and roll into class a little late while still wearing your pajamas. You’re in the real world now, and the dress code is stricter. You need some nicer clothes. It can be easy to get carried away though. There’s no need to buy a completely new wardrobe unless your job specifically requires you to wear a different suit every day of the week.
4. Eat out all the time.
After spending a long day at work, having to come home, prepare, and cook a meal just doesn’t sound like fun. Why do that when you can just go out for dinner with some friends or coworkers or pickup some takeout on the way home? A few of my coworkers practically eat out seven days a week. This is a habit that can put a serious dent in your wallet over time.
5. Buy a new home entertainment system.
I hate to be the bearer of bad news, but it’s not cool to watch everything on your computer screen anymore after college. When you get into the real world, it’s all about the size of your HDTV (for guys at least). Of course, a HDTV isn’t complete unless it’s hooked up to a sweet sound system for the movies, and the movie watching experience isn’t complete unless you’re eating popcorn from an authentic movie style popcorn machine. Alright, so I’m exaggerating, but you get the point.
6. Get married.
A lot of couples decide to do one of two things when graduation nears — breakup or get married. My former roommate and his girlfriend (now wife) chose the latter. I’m not calling them stupid for getting married right out of college, but I do think it was a waste of money. Why? Because they didn’t have any money at the time. I still remember my former roommate stressing out about making the payments on the engagement ring throughout our entire senior year.
I hope you’ve enjoyed this post in the “Graduating From College During a Recession” series. The next post in the series will be up tomorrow at Living Almost Large!
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Another I would like to add is to buy property of some sort. House, apartment, etc. Coming out of college you have to be realistic about what you will make, what your salary can afford, and what you can actually spend now and save for later. Even thinking of buying property is a bad decision.
Uh oh… I have failed this one miserably.
1. I live by myself in a House that I purchased on my own.
2. About a year out and I just bought a new truck.
3. I had to go purchase clothes because I only had about 2 shirts and 2 pants that worked for the office, but got great deal on everything I bought and have not purchased anything since.
4. Eat out way to often, lots of evenings will eat out and most lunches now.
5. At least I have skipped one of these, but that is because I am still happy with the nice tv and stereo I purchased while still in college.
6. Getting married is expensive but so is dating all the time so it kinda comes out in a wash there I think.
Thank goodness I got my job before most of the economic crises hit and I am stable in my current position.
I guess I could have done it very differently and gone completely different ways and if my salary were not what it was then I would certainly have not done most of this.
Good list overall.
Another thing to watch out for is if you move far away it is expensive to travel all over the place, even just going home for some holidays.
Getting married is a big one. It cost a lot of money. People borrowing money to buy an engagement ring is one of my all time biggest pet peeves. It’s a symbol – it’s not something you should be dropping 10k on. If I had it to do over again, I’d probably go cubic zirconia. Plus, if you pay for your own wedding, you’re going to end up spending some serious money no matter how frugal you try to be. It’s an industry of price gouging and effective marketing – “it’s for the most important day of your life!” The truth is, no one ever looks back and says, I’m so glad we sprung for the chocolate fountain, it was so worth it. You don’t need any of that stuff. Good post.
There is a difference between getting married and getting married extravagantly. I am quite happy with my marriage many years later, and the ring that we could actually afford.
I disagree with # 1 completely. I think it’s fine to live by yourself, if you do it right. I’ve written a post at MYC on how roommates actually cost me more then living by myself because of one bad deal after another. In some cases people can make it work and it is helpful to share the cost with others. But, choosing to live alone is not necessarily a stupid move right after college.
To do it right, there are a few things you need to understand.
1. Think smaller, not bigger.
The larger the living space, the more it’s going to cost. Coming right out of college, you really shouldn’t have a whole lot of stuff. Get a small place that is probably well below what you could afford. It may not be the nicest place, but it’s all yours.
2. Forget the “stuff.”
Just because you have your own place does not mean that you have to have all the “stuff” your parents have in their house. They’ve spent a lifetime accumulating it. At this point, a graduate’s goal should be succeeding in his/her career and making a name for themselves, not acquiring all the newest stuff.
3. Be conscientious of bills.
This is a big one, especially if you live alone. Turn off the lights when you leave a room, don’t run the A/C all day, turn off the water while you’re brushing your teeth, etc. Little things can add up to big savings when it comes to utility bills.
There are other things that go into this, but my point really, is that it is possible to live alone and still come out ahead financially. Roommates can be helpful, but they can also be a disaster. It’s best to consider that option very carefully.
Nice list. Actually, I am guilty for some of the items in the list as well such as eating out. I am a guy who is willing to spend on food but I guess I should start to cut down on that.
I agree with basically all of the ideas mentioned. I haven’t done of these things on the list..except think about buying property, and then I moved in with my bf who already owns.
I was shocked at how many of my friends got married right after college (even when they were cheating in college!!). I don’t think a marriage is defined by how nice the wedding is, but it sure will be nice when I get married and am able to pay cash for a larger portion of the bill. Plus, if I were to have gotten married right out of college, I would already be divorced. My life changed so much in that first year that my current bf and I didn’t make it.
As far as the new car goes, I would never buy a new car. By the first year mark the car has already lost 30% value, and I’m sure anyone making payments woudln’t have paid that much off in that short amount of time. FYI-I’m saving my way to a new car. I’m going to have at least 80% paid for when I buy. Although, it does all depend when my junker decides to junk out on me.
I did pretty well on this list, as my two fails are calculated splurges.
1. Fail. I have a place that’s 15-20 minutes from work and costs 29% of my take-home pay. I like it, it’s mine. It’s a splurge that’s worth it to me.
2. Fail. In the month and a half after starting my job I moved into my apartment by myself and bought (and financed) a brand new car. I’m still happy with my decision. I put 20% down. Minimum payments are 7.5% of take-home pay. Sometimes I think of what I could’ve saved, but I rarely splurge and the financing is only 4.49%. I’ve also already put 17k miles on it since August.
3. Win! Work clothes were a graduation present, don’t need much since I’m a guy and work attire is business casual/casual (I can wear jeans as long as I don’t have to go to Corporate).
4. 50/50. I probably eat out 2-3 times a week, though usually treating the still-in-college-and-therefore-poor lady friend so it costs more. It’s usually in the $30-$40 range for the two of us.
5. Win. I did buy TV though…A 27” CRT for $40 off someone at work. I work for an audio company, so I borrow TV, computer, and iPod speakers from them.
6. Win. The aforementioned lady friend and I are going to get married… in 2 years, once we’re able to save up enough to have the wedding we want.
Forgot to point out that I don’t like the assumption that I’m stupid for living on my own or having a new car. What if they’re splurges that I thought about and decided were worth it to me? What if I don’t really splurge on anything else and painstakingly save up money in my tech toy fund when I can easily buy a Wii or iPod Touch and have it barely hurt me? My car will be with me for a looong time. Having my own space means not having to live with a stranger, because I wouldn’t have had anyone I already knew to rent with when I moved out. After my last experience of renting it’s almost worth it entirely because I’ll never have to clean up after someone else.
In short, if you don’t think about these or do all of them it’s not the brightest idea, but I failed the first two and still save 18% of my take home pay.
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Hmm… I’m not sure I agree with all of these completely, particularly getting married, but I see your point. By adopting a “don’t sweat the small stuff” attitude straight out of college, we can be asking for financial trouble down the line. But if we pay attention to the power of small, for instance, not eating out as much or spending less on clothes, we can all reap the benefits.
I would beg to differ on number 6. Getting married is NOT a bad financial decision, because you suddenly have two incomes to work with and are “splitting” the bills. Just because someone gets married does not mean that they spent a lot of money either. My husband and I spent next to nothing since our families wanted to help us out with things like food, cake and rental fees. I made our own invitations as well. We did not incur a cent of debt and are now reaping the financial rewards that comes with marriage. In fact, I would argue that it is one of the BEST things you can do.
Consider renaming number 6 to something like this “Spend a lot on a Wedding”.
I got engaged the day after I graduated college. My fiance still had a year of school left at that time, so we planned a two year engagement. This would give us some time to save, because I refused to go into debt for the wedding! We are spending what we can afford, and thanks to some help from the parents, I think we will be just fine. But, I balance #6 out with 1 and 4, because we live together, and cook for each other all the time.
if only i would have seen this 4 years ago… at least i didnt buy a house… renting alone is an awful waste of money tho… great tips
Good list. It’s been a while since I graduated, but I can attest to wanting to do 1-5 and my gf would have been happy with 6. A couple years later, finally got my own place and a new car and couldn’t be happier that I waited. Patience is a virtue and no one really needs anything.
Those 6 are pretty good, but I could think of about 20 more! Great article, thanks!
True, I have done #2 and a little bit of #4
I made the going out and drinking mistake. I wish I could have at last some of the money back from all of those $6 beers.
I don’t see what getting married has to do with wasting money. You do not have to do things the traditional expensive way. I was still a student when we got married 10 years ago. No engagement ring, and our wedding rings cost around $100 each. Total expenses were around $1000, including honeymoon. We’re just as married as anyone else, and we were also following point 1 on your list: don’t live alone. It is cheaper to be married.
I followed all your other points though. Basically I just continued to live like a student until the student loans were paid off.
Great post! I apparently have made a lot of these “mistakes,” but, in all fairness some factors really outweigh the financial savings. For instance – as a grad student who is taking part-time classes in the evening and working full-time, living alone and having a car are necessary. Living alone always me to study better (and maintain a little sanity) and the car is the only way I could get to class. A new car was the best choice because I got a great deal (an upside to the economy) and my budget can handle a car payment but not the unexpected repair expenses that come along with a used car (my car is under warranty). I guess I’ll have to make up for my mistakes in other ways.
Honestly getting married after I graduated SAVED money. Why? Well now I have an automatic roommate. Also it’s easy to have a wedding and be frugal as long as you do it smartly. Spending thousands of dollars on a peice of jewelry is beyond stupid. My husband and I have simple bands that mean alot to us. Mine is surgical steel (autoclavable and good under gloves) and at the most cost me 30 bucks, his was 80 on Overstock. Weddings are about feelings, not about outdoing the next guy.
So: getting married after college and spending a ton of money, getting in debt, only because you’re trying to impress people…= very stupid
Getting married after college and doing it wisely and frugalling = smart