College students leave school today hopeful for any job. If they are lucky, their new employer will pay them well. Most likely, the young person will be met with an entry-level salary that may not mesh well with the longing for luxuries afforded to their parents — parents with a pretty handsome financial head start.
For those graduating this semester or next, making ends meet may not be easy. Having leaned on their parents throughout college, and perhaps piecing things together with a part-time job, these young people now have all of life’s burdens upon them — rent, car payments, health insurance, groceries, utilities and yes, student loans.
Still, it is not impossible to begin saving money, even with a minimal salary. Here’s how to get started:
1. Get a roommate: I was one of the rarities in college because I lived in a college dormitory for four years, always with at least one roommate. The last thing I wanted when I graduated was the continuation of sharing living space with anyone. I did it anyway and in retrospect, it was the best move I could have made. Rent eats up a big chunk of your paycheck (It shouldn’t be more than 30 percent.), but you can have a nicer place, perhaps live in a nicer neighborhood and save money by rooming with someone for a couple years. Two years after college, I bought my first house, paying just a little more in mortgage than I was paying in rent.
2. Invest in your company’s 401 (K) plan: My biggest regret, one that still eats at me, is that I worked for four years before finally enrolling in my company’s savings plan. Granted, I don’t know how much of that I would still have today due to the recession. Still, I would’ve been better off. It’s an easy and painless way to save. If you can’t contribute the maximum allowed by your company, get as close to it as you can.
3. Automatic deductions: Do you trust yourself to sock away money each week for savings? I wouldn’t. That’s why you should have money automatically put into a savings account from your paycheck. Online savings account have higher yields and will allow you to save more quickly, but if you’re more comfortable with a local bank or credit union, use them instead.
4. Minimize household expenses: There are a number of ways you can minimize household expenses. For instance, use basic cable instead of a full package. If you’re a movie buff, it’s cheaper to rent them than pay for cable. Or, you can go without that all together and use online television options like Hulu.com. Also, it pays to be energy efficient. Little things like controlling the temperature in your water heater, using a programmable thermostat that’s appropriately set, unplugging things not in use, turning off lights when you leave the room, and washing clothes in cold or warm water instead of hot water will save you lots of money over the course of a year.
5. Eat and Drink at home: Most young people love to socialize with friends, and eating and drinking out is a big part of that. Do yourself a favor by keeping this kind of activity at a minimum. Buying alcoholic beverages at restaurants and bars is a drain on your budget. Save money by drinking and eating at home, and when you do go out, look for special promotions and coupons that make it more affordable.
6. Carpool or use public transportation: If it is possible, save gas money by using public transportation or riding with colleagues to work.
7. Bargain shop: You want to look professional at work, and cool when you’re not in the office. Maintaining a stylish wardrobe can get to be expensive. However, you’d be wise to shop for items that are on sale. Make a promise to yourself to never pay full price for clothes and shoes. Your patience will be rewarded.
8. Pay your bills on time: Getting hit with late fees not only damages your credit, but costs you money, too. Being responsible in this regard will pay off in the long run. Little late fees add up quickly. Also, avoid getting into credit card debt.
9. Staycation: You may be getting real paychecks for the first time. After working so hard, you’ll want to take a vacation when the time comes. Consider a vacation close to home, or one in which you stay with family or friends while you’re away.
10. Be disciplined: Sticking to a budget is like torture for some people, but it doesn’t have to be. Find creative ways to be entertained — like having friends over for a potluck, going to matinees instead of evening movies, attending free events around town — on the cheap.
Do you have other savings tips for young people living on entry-level salaries?
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