Business owner, consultant, and motivational speaker Michael Lehrke coaches recent college graduates on methods for budgeting finances after graduating college.
Michael Lehrke will be the first to tell you that life outside of college is hardly comparable to life during it. While in college, students focus on achieving high grades and making the most of their academic career; this requires an immense amount of studying and leaves little room for anything else. After college, however, young adults can focus on real life! This includes beginning a new career, starting a family, and buying a home. But where should they begin?
“Graduation is an exciting and fulfilling time, but it can also be very intimidating to most young adults,” says Michael Lehrke. “The biggest concern I see when coaching new graduates is over their finances. I teach them, though, that gaining a clear picture of overall expenses and learning how to budget will be a tremendous help after college.”
College expenses, Lehrke explains, are usually lumped together in big sums, with one big tuition bill covering class fees, housing costs, and meal expenses. Out in the real world, however, most bills take individual pieces of the graduate’s paycheck, so they should be well prepared for small, frequent transactions.
Mr. Lehrke advises everyone to have two calendars – one for all bills that need to be paid manually (think rent or mortgage payments), and one for bills that are on “autopay”. “You don’t want any surprises, so it’s good to start off with a calendar that you can use to visualize which bills needs to be paid before your next paycheck arrives.”
After college, some people move right into their career fields while others have to work odd jobs until they can find an opening in their field. Regardless, graduates should track how much they make regularly and at that information to their budget. “Even if you are paid hourly at a job with inconsistent hours, you can still find your average NET take-home pay. Use this to start the budgeting process.”
Lehrke suggests starting a budget by listing all fixed expenses. This includes rent, internet service, tv service, streaming services, mobile phone service, car payment and insurance, housing insurance, and student loan repayments. These are known as “fixed expenses” for a reason – they will be the exact same every single month.
“After subtracting your monthly fixed expenses from your monthly after-tax take-home pay, you’re left with your discretionary income,” Michael says. “Now the fun begins! You are in control of how you spend that discretionary income. Will you choose to eat out or cook at home? Will you choose to see new movies in theaters, or stay home and watch TV? Will you choose to wear the latest in-style clothes, or can you get by wearing tried-and-true fashion staples?”
Lehrke and other top financial advisers also recommend paying for all expenses with a credit card that you also pay off every pay period. “Never, ever, ever use a debit card for purchases. Ever. Debit cards do not come with the same protections that credit cards do. If your debit card is used for fraudulent purchases, it could take weeks for you to get that money back in your bank account. If your credit card is used for the same fraudulent purchases, you won’t be out any ‘real’ money. Also, the bank that issued your credit card will often be happy to restore your available credit while the charges are investigated.”
Michael recommends being careful with credit cards, though. “If you are given a big limit on a card, there is always temptation to spend. But remember: if you can’t pay your credit card bill in full every pay period, then you can’t afford your lifestyle and need to make immediate changes.”
Lastly, Michael Lehrke recommends locking your cards when are not in use. “Use one credit card for your daily purchase, and manually lock all other debit and credit cards. There is no reason to allow transactions on cards that you won’t be using anytime soon.”
With the above tips, young adults will have the tools they need to succeed after graduation.