5 Money Lessons for When You're Graduating with Debt

Guest Post by Matt Smelser

Oh hello. Let me introduce you to Matt.  

He's hella funny and you're about to get a taste of what he's got going on over at Get Your 20's Right — stick figures and all.

Humblebrag: We're friends in real life. #midwesthomies


5 Money Lessons for When You're Graduating with Debt // Ask Allea

This is the story of two fictional stick figures. Their names are Billy and Bobby.

Both just graduated from college with $30,000 of student debt.

Billy is a good kid. He likes photography and he goes on lots of adventurous photoshoots. Billy has a lot of friends and loves living in Awesomeville, Colorado. He is very optimistic about his future and he cannot wait for his dreams to come true.

Bobby is also a good kid, but he has a serious side. He wrote for the school paper for fun and helped his friends by proofreading their papers in college. Bobby also has a lot of friends, but he’s knows that he might have to leave Awesomeville someday. He is optimistic about his future, but knows that he has a lot of work ahead if he wants his dreams to come true. 

Importantly, Bobby knows everything that I wish I’d known at his age. Billy doesn’t.

Let’s see where their stories take them.

Straight Outta College: What I Wish I’d Known About Money // Ask Allea

 

Lesson #1: Follow Opportunity, Not Passion (Day 1)

For Billy, passion is a big deal. Because Billy doesn’t want to compromise his dreams or become a hypocrite, he applied to about 10 jobs after graduation in the surrounding area of Awesomeville.

None of them worked out. But no big. Since Billy is passionate about coffee and his friends, he takes a job as a barista in Awesomeville, making $20,000/year after taxes. He could work more, but he values his free time to pursue his photography hobby.

For Bobby, getting out of debt is a big deal. He goes to the library and reads up on job hunting. He applies to 50 jobs in Awesomeville and another 50 jobs in the midwest (where the cost of living is half that of Awesomeville).

Related: Perks of Paying Off Debt Fast

Even though Bobby would love to use his creative writing degree, he ends up taking a fairly good job in Human Resources in No-Mountains, Kansas. 

Straight Outta College: What I Wish I’d Known About Money // Ask Allea


Lesson #2: Understand Buying Cheap vs Quality vs Luxury (6 months after graduation)

Billy knows that he needs to pay attention to his finances. He’s not irresponsible, by any means. He starts clipping coupons and shopping sales at the mall. His philosophy is: if it’s not on sale, it’s too expensive.

Related: Find Out Where Your Money Is Going

Billy also [thinks he] needs a new car. His old one has 150,000 miles and doesn’t have a lot of legroom. Also, his girlfriend doesn’t like it. Did I mention that Billy has a girlfriend now? Anyway, Billy buys the cheapest new car on the lot for $15,000. He mostly uses it to drive across town to do Crossfit (because girlfriend).

Since moving from Awesomeville to No-Mountains, Bobby has been learning the difference between cheap, quality, and luxury. He knows that buying quality groceries is not going to make him poor, but will actually give him the energy to live an awesome life. He never goes shopping because he hates being tempted by sales. 

Bobby actually needs a new car, but he knows that a new one is a luxury. He begins saving $5,000 for a reliable used car. Until he saves the money, he vows to ride his bike to work or solicit rides from coworkers. Bobby doesn’t get a gym membership because all of the walking, biking, and eating vegetables is keeping him healthy (and because gyms are a luxury).

Related: Choose Your Own Adulthood

Straight Outta College: What I Wish I’d Known About Money // Ask Allea

Lesson #3: Learn A Marketable Skill Every Year (1 year after graduation)

OK, Billy is pretty sick of working at a coffee shop. He knows that he needs to make a change.

Emulating all of the other coffee shop entrepreneurs he sees everyday, he decides to start a photography business. He spends $2,000 on the equipment he thinks that he needs and another $1,000 on advertising. 

He shoots a few weddings for friends and quickly quits his job, fully expecting the business to roll in like thunder. Billy is very excited. 

Bobby is also pretty sick of his job in HR. He doesn’t quit, though. He commits to improving his resume by investing 5 hours every week learning a new skill. Unfortunately, he doesn’t know which skills are most valuable to employers. (And he knows that creative writing isn’t one of them.)

He starts asking around. He learns that his company offers different formal training for free. He’s not mega-interested in any of the classes, though, so he hops online and takes an accredited training course in data analytics. He adds it to his resume and applies for a few jobs, just for fun. He realizes that his resume looks pretty sexy with his new certification, so he starts working on another one. Five hours a week isn’t much.

Straight Outta College: What I Wish I’d Known About Money // Ask Allea

Lesson #4: Have A Purpose For Every Dollar Over $25,000 (2 years after graduation)

For Billy, passion is still a big deal. While Billy is still passionate about photography, he is now much more passionate about not being broke as hell.

Billy’s photography business crashed and burned six months ago when wedding season ended. He never really learned the financial side of things, nor was he a big fan of marketing. Even though he is a quality photographer, Billy never devoted himself to learning the secondary (but necessary) skills of entrepreneurship.

Since he had no emergency fund, Billy was forced to take a steady job to pay his debts. It’s actually a pretty good job. Now is the first time in his life that he has been able to pay down his student/car/credit card debt. It feels good to have a little bit of control over his financial situation. 

At the same time, Bobby is throwing a party to celebrate paying off the last of his student debt. He transferred departments at work, got a raise, and used the extra money to speed-up his debt repayment plan.

Related: How I Paid Off Over $12,800 in Loan Debt in One Year (Both Car + Student Loans!)

But Bobby has a new problem. What is he to do with all of his money? It’s awesome that he’s making $55,000 every year, but he can’t imagine spending more than $25,000 on himself every year. Everything he owns is high quality and long-lasting. Plus, he’s not insecure enough to buy an apartment downtown or get a sports car. (That lack of insecurity is an incredibly attractive quality to his new girlfriend, by the way.)

Bobby decides that he wants to use money to do three things: help others, retire early, and become a published author. He starts giving 10% of his income to a local charity. He maxes out his 401k and Roth IRA contributions (and invests a little extra in an index fund). He sets aside a few thousand dollars to take online creative writing courses and attend conferences.

Straight Outta College: What I Wish I’d Known About Money // Ask Allea

Lesson #5: Make Money Work For You, Not The Other Way Around

No one wants to be a sell-out. 

You and I want to do what we love, stay true to ourselves, and live for more than a paycheck.

But being wise about money doesn’t make it your master. Actually, being wise about money makes it your slave.

Related: Find the Balance: Pay Down Your Debt & Still Have a Life

Billy ended up being a slave to money, while Bobby learned to master it. It might have looked like “all Bobby cares about is money,” but that just wasn’t true. Bobby cared about his passions and his quality of life. He made hard decisions that increased his chances of  success. Billy let others make financial decisions for him.

And in the end, Bobby is the one following his dreams. 

The good news is that—whether you’re a Bobby or a Billy—you can still learn to master your money. 

Hint: Two good places to start are Allea’s Real Life Money Guide or my website, Get Your 20’s Right.

—Matt

What is ONE thing you wish you had learned about money earlier?

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