Budget Hater

Graduates beware of the Easy Money

Posted by Aaron Coleman
May 24, 2013

This time of year is an exciting time for young people graduating to the next level of their lives.  I can’t think of a more optimistic time in a person’s life.  The hopes and dreams of millions are just taking off.

Unfortunately, many of those hopes and dreams are dashed by the reckless accumulation of debt.  My advice to anyone graduating this year is simply this: There is no such thing as easy money.  It will come at you disguised in the form of credit.  And that credit glides in under the false promise of being the only way to achieve the hopes and dreams you are ready to embark on.  

High School Grads

For high school grads, the dangerous credit comes in the form of student loans.  Student loans are certainly a viable option to pay for continuing education.  But many young people agree to take on much more debt than they really need to complete their education.   And it’s understandable: “I have my whole life to pay that back.”  The problem is, young people don’t understand how that debt becomes a huge burden later in their life. 

If you decide to take on debt to pay for that next level, only take what you need to get by.  Eliminate the luxuries and live the simple life.  Here are four simple guidelines:

1)    If you take on a student loan, make sure the degree in which you seek will prepare you for a job with enough income to pay the loan off in a short period of time.

2)    Get on the four-year plan. Taking five or six years to graduate will result in a much more burdensome debt over the long haul.

3)    Live in-expensively.  Eat at home, live with used stuff, cut the cable, etc…

4)    Live close to campus so you can walk and ride a bike.

College Grads

For college graduates, the dangerous credit comes in the form of credit cards.  Many college grads finally land a job and are promised a salary or commission.  They think to themselves along these lines: “Sweet.  I have a job that will pay me $2,000 every two weeks.  I can finally buy that new TV and sound system I want.”  They then go buy the cool electronics using a credit card.

Unfortunately, the $2,000 every two weeks comes into their bank account at much lower number.  Taxes, insurance, etc. are taken out.  Then the monthly living expenses kick in.  All of a sudden, there is no cash left over to pay the credit card bill.  And the disastrous cycle begins of minimum payments and compounding debt.  It’s an easy cycle to fall into.  Banks know this and make great profits off graduates thinking they all of a sudden have access to extra money – “easy money.”  

Instead, take that first couple of months and create a simple budget to live from.  Save your extra income and pay cash for the fun things.  You will find that starting out with this simple discipline will someday provide you with much more than you ever dreamed of.  

Congrats!

Congratulations on your big accomplishment!  We at Winning With Money wish you all the best and look forward to the great things you are going to contribute.   Log into www.winningwithmoney.com to learn how to get started in managing your money for a lifetime of success and prosperity.  It’s easier than you think J


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