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Photo: Liza Lagman Sperl
A lot of people are saying that college is not worth it these days. We have unparalleled access to information and technology, leading some to call college a waste of money. I don’t agree that an undergrad is a waste (though with grad school I’m more inclined to agree), because you can get a fairly cheap in-state tuition, finish in three to four years if you’re ambitious, and learn the basics of a profession. While some of that you can learn on your own, college has tons of hidden benefits like learning to be an adult, be on time, juggle bills and classes, and meet and interact with people not like you.
Another criticism of college is that it doesn’t teach basic things like how to buy insurance, how to take out a mortgage (or other loan), how to budget, or basic home/car repair (to name a few). These are all skills that just about everyone needs but usually learns the hard way or doesn’t learn at all. So, here’s a list of things you should learn and practice when becoming a young professional.
Note: Much of the advice below is pretty basic, but that’s the point. Basic stuff tends to be EASIER to skip than the more complicated or esoteric. People walk by the lowest hanging fruit, maybe because they’re focused on the higher stuff, maybe because they don’t think they need the low stuff. Fact is, easy stuff is important but easy to miss, so it merits mentioning.
Get a Budget
Because it’s your first job, we’ll assume you don’t have a lot of money. That’s good, pinching pennies will teach you a lot and probably motivate you to earn more down the road. It also teaches you to appreciate the things you do buy.
I know really smart people that don’t know shit about budgeting (I was definitely one). And I’m not talking about accountant-level reports, I’m talking about keeping track of what you spend and matching that with how much you make. First thing you should do is buy and read a personal finance book. Even if you are a finance major, you probably didn’t cover basic personal expense tracking or investing. I like the scammy-sounding-but-actually-quite-helpful I Will Teach You To Be Rich, by Ramit Sethi.
I also like JD Roth over at Get Rich Slowly, JD’s book is Your Money: The Missing Manual. Both are great options and will get you started down the right path of managing your finances.
Bottom line when creating a budget – the details matter! I don’t care if you’re “not a details person” money IS detailed, so you need to play by money’s rules. If you are buying Starbucks everyday, which is probably NOT advisable if you’re poor, you need to keep track of all those expenses. If you don’t know how much you spend on a monthly basis, and on what, you’ll never be able to save or invest. All that money will evaporate because it’s unaccounted for. Don’t let your hard-earned money slide away, keep track of it!
Once you’ve got your expenses down, you can match them against how much you make and see what needs to be cut, or how you can make more, in order to lead the life you want and while saving the amount you want. This is not optional, people! Part of being an adult and making money is keeping account of it.
Recommended tools: Mint.com – free personal finance tool, automates a lot of the accounting and budgeting, requires passwords to your financial institutions. If you want to go old school, put together an excel sheet or Google spreadsheet and list the categories of what you spend and what you make. That is a dead simple way to see what’s what, but it’s kind of high maintenance to manually enter every expense.
Learn to Cook (and pack your freaking lunch)
Food, most of the time the cheap and bad-for-you-kind, is so easily accessible in college that people aren’t compelled to cook. Then, when they move away from college, they’re inclined to keep doing what they’ve done – eating out and making frozen dinners. I love to eat at restaurants (like, REALLY love it), but if you are a poor, newly employed young adult, restaurants are a very expensive way to eat (except in places like New York and I’m sure a few other places, where grocery shopping is prohibitively expensive and it’s cheaper to dine out. Eating out is still expensive, but cooking might not cheaper.
Watch a few shows on the Food Network, find a few (free) easy-level recipes online, and get practicing. You’re going to suck at first, but that doesn’t mean you’re bad, you just need to practice. If you have a significant other or friend that can give you pointers, soak in everything you can. Cooking is rewarding, fun, and a great way to save on meals out. You can have dinner and wine at home for a fraction of what it costs at a restaurant, why not do it? Plus, cooking will make going out to dinner a special treat, which is what it should be reserved for if you’re poor and just starting out.
Another thing young professionals spend a ton of money on, that’s often quite avoidable, is lunch. Unless you are constantly entertaining clients, or traveling for days at a time, pack your freaking lunch! Buy sandwich meat, bread, and whatever else and make yourself a healthy and cheap lunch everyday. This will help you avoid the fatty foods that most restaurants serve, and probably save you $50 per week in dining out costs. Yes, you’ll have to buy groceries, but that’s almost always significantly cheaper than paying for each lunch, and it can be way healthier. Check out this calculator to get an idea of how much you spend and how much you could save.
Get Insurance – any kind of insurance
Hopefully you get discounted or free health insurance through your employer. If so – great, you can skip this section. If not, you need to buy insurance. Repeat, you need to buy insurance, any kind of insurance, at least to guard against a huge medical expense. Medical debt is becoming more and more prevalent, with one in four adults having some medical debt last year – an all time high. Insurance doesn’t guarantee you’ll be covered in all cases, as the link story notes, but it at least gives you a chance to avoid bankruptcy.
Think it won’t happen to you? In 2001 my appendix began to rupture and I had to go to the hospital for an appendectomy. I was there for two days and the total cost was about $12,000 (I had insurance, which covered most). These days, something like an appendectomy, which is totally random and unpreventable, costs about $15-18,000, and that’s just one example. Injuries from a car accident, for example, are potentially much higher. You really want to saddle yourself with that kind of debt in your early twenties?
A few options:
- Stay on your parents’ plan, usually until you are 25. Discuss the details with them and be sure you are covered under their plan. Don’t assume!
- Catastrophic coverage: Also known as major medical coverage, this type of insurance typically prevents you from a huge expense such as the one I detailed above. The deductible you pay is pretty high (maybe something like $5,000 per year), but after that your bills are pretty much covered. Obviously each plan is different so be sure to shop around and ask lots of questions. Major medical coverage is a good option for someone too old to be on their parents plan, not receiving employer-sponsored health insurance, and, generally, in good health.
- Buy your own private health insurance: There are more options than you might think for buying your own health insurance – some extremely expensive and some less so. Here’s an example from Get Rich Slowly about how someone bought their own coverage. Tons of factors will shape your insurance costs (age, sex, weight, smoker/non-smoker, medical history, etc.) so I can’t really ballpark costs. Check out the link for more information about this option – it gives a good overview of things to consider.
But I’m too busy!
You know what? Shut up, no you’re not. No one is too busy to do the few things outlined above. If my parents can pack three lunches and get three bratty kids to school everyday while still getting themselves to work, you can shop for and pack your damned lunch. Usually when you think you don’t have time it actually means you are too lazy to make the time. If that’s the case, so be it, but you need to know what that laziness costs you.
Again – this is very basic but in no way optional stuff. Even if you’re fabulously wealthy, you still need to keep track of your money, so you might as well start early before a bunch of it flies out the window. Even if you’ve got tons of money, eating out has health costs associated with it, costs you can avoid by packing your lunch and knowing what you’re eating. Want to see a big pile of money vanish? Be uninsured and get hit with a massive medical liability and – poof – that money’s gone. Do your homework, cover your ass, and protect your money. You’ll be a much more stable professional if you do.
