The world is tough, my friends. A lot of college students, as they approach graduation, are looking for the next steps.
"Do I take that corporate job?"
"Should I enroll in a Master's program?"
"Is it time to start my own company?"
These are legit questions that often get a subpar answer. In what follows, I will give you a complete guide to help you answer the big questions that you have, while also keeping you solid with your finances. There are three ingredients to this formula:
Some people will tell students to go and "experience" their twenties, but they are only riffing on one of the three ingredients. See, to have a recipe for awesomeness post-graduation (and also to get you off of your parents' couch) you need to balance all three. Practicality is synonymous with being reasonable. Capital is the amount of money you need to fund your new adventure. And Risk is how much damage this could potentially do to the rest of your twenties and thirties.
Everyone has a different level of reasonableness, yes that's a word. When you leave college it pays to be practical because a lot of students run right into the thought process of entitlement and that doesn't help anyone.
Examples of this would be: I deserve a new car, a little credit card debt won't hurt, and lastly and arguably the most damaging, I can wait until I'm 30 to invest. Delaying your investments for eight years (22 to 30) would prove to give yourself a significant setback.
Let's look at the numbers:
A 22 year-old who invested $200/month from 22-60 at a 10% return, would have about 1.1 million dollars.
On the other hand, a 30 year-old who invested $200/month from 30-60 at a 10% return, would have roughly $460,000.
See how much of a difference 8 years can make?
Another area of practicality to look at are your goals. What did you want to do once you finished college?
Master's program? Start a career? European trip?
Having realistic goals is important and you cannot have realistic goals unless you take the time to think about what it is you want to do. If you've never done that, try this:
Go to the library or a space where it's quiet. Take a notepad and pencil and leave all tech out of range; write for one hour about what it is you want to do.
It may not seem like it, but starting early can have so many benefits and it all starts with being practical. Really think, meditate, and pray about where you want to be and how you're going to be there. What's a reasonable line of events that needs to be put together to get you where you need to be?
Answer that question, and you'll easily be ahead of 90% of your peers.
The thing that a lot of college students don't have, unless it's refund-check season. How much money you have following graduation is important as you need to match your liabilities with your income. Whether you raise your income or lower your liabilities, they have to match.
Traveling and getting "world-educated" is nice, but not if you're putting it on a credit card with 15% interest. Your capital has to match what you're doing and it is important to get it right early because if you make a lot of mistakes with debt, it will take longer to gain traction.
Time is the most valuable asset we have. Kicking the debt-can down the road and saying "I'll be able to take care of it later" is irresponsible. Start working on it now; be accountable to yourself, now. It's not all about money and wealth, lowering your stress is the name of the game and limiting things that cause stress (financial hardship) is demonstrably important.
Need a reference point? Start at Move #1 of my financial plan and see what Move you make it to, then think about how to get past that Move, and then the next one, etc.
How much risk can you take? That depends on doing a self-audit and possessing self-awareness. Myself, with two kids, a mortgage, and a wife, my tolerance for risk is significantly lower than it was when I was 20. I can't take a high-risk job right now as it would be unwise; equally, I cannot start a business and quit my job, it has to be transitional.
7 years ago, I very well could have and not felt much pressure, today that would be a different story. Assessing risk is important. Financially and relationally. We believe that we are invincible but story after story affirms that people from lottery winners to celebrities blow money and lack control. Self-control, self-awareness, and being able to judge yourself are three important abilities you need to possess to access your own risk. If you cannot do this yourself, ask a trusted friend. Note the word trusted.
Taking the next step in life can be scary. Unfortunately, people are quite thoughtless with what they say about people who still live with their parents. A question that's common is: Should I still live with my parents? The answer is: It depends. It depends on what stage you're in and how your parents feel about the situation. You don't want them to enable you and you don't want to be leaching off of them and potentially limiting their retirement potential. That's where conversations come into play and every situation is different. You'll know when you're ready IF you take the steps to think about what's coming next.
It's your decision.
Think about it. Write about it. Pray about it. Execute.