By Brian Short, CMC, CRMS, GMA
If you can count the number of days, weeks or months until you graduate and “enter the real world” of having your own place, buying your own food and doing your own laundry, then let me give you a few tips for how to set yourself up for financial success – especially when it comes to buying a owning your own home.
1. Don’t buy a house during your first year out of school or during your first year of marriage. Hold it – I’m a mortgage professional! Shouldn’t everyone BUY a house – as soon as possible??? Not always! Working through the adjustments of a new job, a new city, new schedule or a new spouse will be time and emotionally consuming enough without the added pressure of shopping for, qualifying for, buying and moving into a new house. Rent for your first year before you begin thinking of buying. You may have second thoughts about your location or employment situation in one year which will help you decide when and where you might want to buy a house.
2. When interviewing for a job give high priority to a job which can help you pay-off any school debt you may have in the shortest period of time. Think about knocking down you student loans and saving for a reliable car during those first couple of years after graduating. If you are not married, you will not want to bring your student loans with you into a new marriage. So make this a priority to pay off all your debts by living very simply and write out a payment plan to pay massive amounts toward your debts. Take on roommates, drive an older car, eat out less, buy less expensive clothes – do all you can to PAY OFF DEBT!
3. Live on a budget. Write it out. Put it on paper and stick to it. My wife uses www.mvelopes.com for our personal budgeting needs. It is an on-line “envelope system” which will let the user start each month with allotted amounts for each category in your budget and then be required to move money from one “envelope” to another if you overspend in an area before the month comes to an end. A user can “sync” your bank accounts to your “envelopes” and so you can move money out as checks clear or debit card transactions ar posted.
4. Keep balanced. Now is the time to develop life-long spending, lifestyle, health and relationship habits. You don’t have homework, term papers, exams and assignments hanging over you now – so you no longer have any (or fewer!) excuses! If you have been putting off going to the gym, starting a diet, learning to cook (or dance, or play a musical instrument, or paint), going back to church, looking up your old friends from high school, or whatever you have wanted (or needed) to do while you were in school, but never had the time or money to do – do it now!
However, do what will bring about balance in your life. If you have been without physical exercise for the past several years – do that. If you have drifted away from your faith and your deeping spiritual life – work on that. What will bring balance and what will give you new things to learn and make your life a joy to live? If you are happy – truly happy – others around you will be happy, as well.
5. Live with margin in your life. Each time you get paid, pay down debt and put some money away. If you are earning $4,000 each month, try to live on 1/2 of that amount until you have your debts paid off and you have built some financial cushion in your life. Dave Ramsey calls these “Baby Steps”. (www.daveramsey) You should have an Emergency Fund ($1,000) and 3-6 months of your expenses in savings before you begin your long-term and retirement savings funds.
Also, build in some margin in your health, your relationships and your intellectual development. Eat good foods (Not too much – your body is slowing down as you move into your 20’s and 30’s.) take vitamins and supplements to help you rebuild the past 20-25 years of abuse. Surround yourself with people who are “givers” who help you accomplish your life goals.
I concluded years ago that there were two kinds of people in the world: “Givers” and “Takers”. “Givers” know how to contribute to the the “building-up” process in others lives. “Takers” are constantly trying to get all they can from others – sympathy, pity, attention, money, worth, time, etc. Stay away from those. They will suck the life out of your life if they are given the chance. Be with those who, like you, desire to be “givers” because they are confident, secure, valuable, focused, sensitive and respectful of others’ time and possessions. Intentionally put yourself around others you want to become like.
These are great days of very few pressures and responsibilities – even though you may not feel like this at times. Enjoy your 20’s and see the world! You will have many years to be very committed to a house payment and job and family responsibilities. However, your 20’s can be great years of learning about yourself and developing good life-long habits which will bring about decades of joy and fulfillment if you spend these years wisely.