We are well into the summer of 2011, which means thousands of students have made the big step of graduating college and entering the real world. I emphasize real world because the concerns that we have while in college are much different than the concerns we have after college. In college, the main things most people are worried about are where and when to study and eat. Getting good grades and finding some time to spend with friends are the tasks of the day. This will most likely change after college.
For all the focus on money and products in this capitalistic society, it is curious that basic financial advice is not really emphasized in high school or universities. Sure, those people who are interested in it will find the information, but not everyone is eager to read about financial management. This information should be presented and readily available for all in order to prevent the major financial hardships that are all too common nowadays, such as high credit card debt, home foreclosure, and bankruptcy. There are many different financial situations college students can find them in. Some students can be up to their ears in student debt after completing a professional school. Some could have no debt because of a scholarship or outside help. Some may have tons of credit card debt, and others may have none. And there is everyone else in between. No matter what the situation though, making good financial decisions early will help you pay off debt quicker and get you on a positive footing for the rest of your career. Here are just a collection of some financial tips to get started.
Don't Spend It All in One Place
Getting that big paycheck for the first time can be an exciting and overwhelming experience. We have many things we would like to spend it on: covering more student debt, the latest cell phone, new shoes, helping out family members, a wardrobe update, and the list can go on. But the single best thing you can do for your financial health is to not go crazy on increasing your standard of living, throw whatever you can on debt, and actually save a portion and maybe use a little bit for a treat for yourselves or others. Self-control is the key here, and if it can be mastered early on, it will serve you well for the rest of your life.
Forget the Debt
Many new grads, especially professional school grads, will go out and get a house and finance a brand new car soon after they get out of school because they think they can afford it. No matter if the reason is attaining prestige or just buying yourself a nice graduation gift, this is almost always a bad idea. The fact is that student debt is at an all time high, and taking on more debt in the form of a mortgage or car payment is not the best way to go. Debt can be crippling and restrictive. There are many alternatives, such as sharing an apartment with friends, or even staying with the parents. Debt is the enemy, and it can be avoided by not taking it on if you do not need it at the time.
Retirement may seem far away, but long gone are the days when your company will take care of your expenses after you retire. Social security is in danger of collapsing and will only cover a small percentage of most people's expenses, if anything. We are mostly on our own, so it pays to start contributing to a company retirement plan or an individual plan. Our life expectancies are getting longer and longer, so most of us will live full and active lives insha'Allah for many years after we stop our full time jobs. It is important we have something saved up for that time in order to live our lives and help those around us. The earlier you contribute, even as little as $50 a week, the better off you will be.
A good way not to spend away money frivolously is to set some early financial goals. Having goals such as paying off student debt, building an emergency fund, and saving for Hajj and Ziyarat will keep your spending and saving focused and efficient.
Don't Count on Your "Future Self"
People tend to justify extravagant purchases by telling themselves that since they will make more money in the future, it will be all right. While you most likely will make more money, life events can tend to get in the way. Job loss, illness, disability, and countless other things can occur and can be a huge setback if you are not prepared. Betting on making more money is dangerous, because you are putting yourself and your family at risk by not being ready in case of an emergency. And no purchase is worth that.
Give Something Back
It is always important to help those entities who helped get you the success that you have. Giving back money or services to the community and your family is important. But the one who gave us all the opportunity is Allah, and we should make sure we do our duty to Him. Paying our Khums accurately and on time is essential, and helping those in need as much as we can should be one of our primary goals. We would do well to remember that the sustenance we get is not ours, but we are the caretakers. Giving back is good for the soul in this life and the next.
These are just some key points that graduates should remember in order to have good financial health. Many good books are available on this topic too. The Money Book for the Young, Fabulous and Broke by Suze Orman is a great read to get started, along with I Will Teach You to Be Rich by Ramit Sethi. Both books contain good, specific tips to apply right away in the life of a new grad. And do yourself a favor by checking them out for free at that underused gem we all have, the local library!