Getting that college degree is supposed to change everything. You land the perfect job that gets you the nice apartment and the loving mate. Everything works out according to the plans you laid out in middle school. And then you wake up from your childhood and enter a new, undefined but very real stage of your life called adulthood, where income does not match expenses.
Moving Out (Or In)
The average rent in 2013 was $905 a month, with rates rising or falling depending on demand, according to the U.S. Census Bureau. San Francisco is the most expensive with rents for a one-bedroom in the $3,000 range. Compare this to a study conducted by the National Association of Colleges and Employers, which found that the average college grad earns $45,327 annually for that first career job. Take away about one-third for taxes, and your take-home is just over $30,000 or $2,500 per month. Using the averages, your rent would be about one-third of your income which, according to the financial website Bankrate, is right where you want it. Remember that in order to move in, most landlords require first and last month’s rent plus a security deposit, generally in the $1,000 range.
Things fall apart when the area rents surpass the amount you make. You do not want to pay over 50 percent of your income to rent. If this would be the case for you, it may be better to get roommates or live at home until your salary grows. Living at home does not offer you a freebie. You should still pay your parents some fixed amount monthly. The remainder of your budget needs to go into savings. Wasting your money on parties and video games will not help you start your autonomous adult life.
Paying Bills (And Forgetting To Pay Bills)
If everything was done with cash, the world would be a simple place. At its foundation, money comes in and money goes out. If you do not have enough money to pay for something then you cannot get it. Credit cards and checking accounts mess up this dynamic. Both have fees associated with them and defer payment to a later date.
It is easy to lose track of the ins and outs of your finances. This is one of the reasons that Americans have, according to the Federal Reserve, more than $3 trillion in credit card debt. If life does what it has been known to do and throws the young spender for a loop, there are some things that you can do to quickly right the situation. If you are receiving monthly payments from a structured settlement, you may be able to sell your future payments to a company such as J.G. Wentworth for a lump sum of cash now. You could then use this money to help pay off debt and maintain your credit.
Starting Your Career (Then Changing It)
You just spent four to six years learning the things that you need to start your career. Now, plan on changing it several times. According to the Bureau of Labor Statistics, the average adult has 11 jobs, three to five careers, and is unemployed five times in their working life. You do not want a career change or unemployment to be a total surprise. Start putting away money for each of these eventualities. A nest egg can allow you to start your own business, save you if you are laid off, or give you breathing room while you change careers.