It’s high school graduation season, an exciting time for graduates and their families.
Most graduates probably have an idea of what they plan to do in the next stage of their life, either go to college or go straight to work.
I used to think that dropping out of college was a huge mistake. Not as much, provided the person dropping out of higher education pursues a marketable skill. A skilled carpenter, plumber, or electrician will never be short of work, and many of them earn more than many college graduates.
But for those going to college, here’s my #1 tip: Avoid college debt as much as possible.
President Biden and Democrats in Congress are currently talking about canceling some or all of the college debt alumni have accumulated. Even if that happens, don’t count on getting the same consideration.
Students borrowing for college are graduating today with an average debt of $30,000. It’s a huge chain around your neck when you get out of school.
This limits many of your other future choices: how much rent you can afford, how much car you can afford, and even how much work you can afford.
College debt can also cause you to be more hands-on with your choice of major, pushing you to study a subject you may not be passionate about but which you think has a better chance of landing you a job that can help you. to repay all this debt. you have accumulated.
You will spend 40 or more years of your life working once you graduate. Most people end up in jobs they don’t like that much, but they stick with them because they give them more income than a job they would rather do. The more debt you have, the more likely this will happen to you.
The thing is, not everyone goes into college debt. A third of university graduates get away with nothing, and not all of them come from wealthy families. You want to be in that third.
How do you do?
Ideally, you did well enough in high school to earn a scholarship or grant. But even if you haven’t, there are things you can do to avoid getting into debt.
First, do it in four years or less. You may not be in a rush to get out of college – it can be one of the best years of your life – but a fifth year adds 25% more expense.
Second, find a part-time job during the school year and preferably full-time during your summer vacation. You may prefer to be served than a server, but the former spends money while the latter earns it.
You are lucky enough to enter college when the demand for workers exceeds the supply. This means that there are plenty of employers willing to give you a job, even if you have no previous experience. They will probably pay you more than they would have paid students just a few years ago. Take advantage of this opportunity.
You may think that working will interfere with your studies. It shouldn’t. A part-time job will force you to better manage your time, a great skill to develop. Less free time produces fewer distractions.
Working will also allow you to put money in your pocket, for which you will not have to beg your parents or borrow. And it will look great on your resume when you start applying for your first job after college. Employers look to candidates who have demonstrated a strong work ethic. The job doesn’t even have to be in your prospective career field. The employer just wants to know if you have an employment history.
Third, live within your means. You don’t need to have the latest smartphone or the best wardrobe right now. There’s plenty of time for that when you can better afford the luxury.
Some of your generation grew up expecting instant gratification. They have been led to believe that if they want something, they shouldn’t have to wait. It’s a trap, setting them up for a lot of disappointment or a lot of debt.
Credit card companies know this, and if they haven’t already tried to sign you up, they will soon. Discard these apps.
For all their freebies or cash back promotions, the average credit card charges 15% to 20% interest. Compounded over time on outstanding balances, double-digit interest rates will plunge you into a hole you may never be able to dig unless you file for bankruptcy.
There are certain transactions where using a credit card is preferable to a debit card: airline reservations, hotel rooms, and online purchases, for example. But the temptation to use a credit card for purchases you can’t afford outweighs these benefits. Wait to get a credit card until you have the income to pay off the balance in full each month.
Some debts are unavoidable. Few people have the savings to buy a car or a house with cash. But keeping debt at a manageable level can save a lot of stress. The model for how you manage yours starts now.
– Contact Tim Kalich at 662-581-7243 or [email protected]