Today I’m here to talk about college, graduation, cash flow, and “adulting”. My kids learned about spending less then they make and saving a little for later as they grew up. But I find most people didn’t. Whether you’re 16, 25, or 55, there’s a good chance you’re struggling with getting this teeter totter of spending less than you make and saving a little for later, just right. (It’s ok, you’re not alone and we are here to help.)
I’d like to tell you a story about Walter who just graduated from college and got a great job making $50,000 in Mayberry, Connecticut.
Walter’s Story: College Graduation
Walter was surprised how much it cost to start his “adult” life. He had to buy a car (chuh ching!), rent an apartment, paying first and last month plus a deposit (double chuh ching!), and had to stock his first kitchen with the basics (a microwave, one plate, one spoon, and one knife, and food was going to have to suffice for a while).
Nobody told him how much it was going to cost BEFORE he even started his job.
Walter wondered why he hadn’t saved anything while he was in school. He actually worked while he was in college, but he blew all of the money on clothes and going out with his friends. He wishes now that he had saved at least some of it.
Walter remembers a friend whose mom was a financial planner telling him he should save some of his money for getting started after school. He thought his friend was crazy. Why would he need to save for after college? He’d have a good paying job at that point. Now he realizes that he needs money before his first pay check.
Walter had a good paying job, but it didn’t start paying for a month. He had to pay for a lot of stuff before he ever got paid. He had college debt, and now he has a car loan and he borrowed money for a mattress. Mattresses are SO expensive! Luckily, Walter didn’t have to pay anything for one year on the mattress. He’d be rolling in money by then.
Walter has a classic Cash Flow problem.
His expenses out pace his income right now.
It will be fine in a year. Heck, it’ll be fine in a few months but he’s going into debt NOW. What should he do? This is where an emergency fund is great for paying for those unexpected bills. However, as a college student Walter didn’t even know what an emergency fund is. Like most college students, there’s a good chance the bank of mom and dad had been paying the bills. Walter wasn’t even thinking about what his expenses were.
Is Walter’s situation resonating with you?
Relax, we’ve got your back. Your parents did the best they could. I’ll let you in on a secret, most parents aren’t taught how to manage their money, develop an emergency fund, etc. either. They’re just winging it. Let’s stop that cycle with you! Stick around and we’ll help you figure out your cash flow with as little effort as possible.
Step 1: figure out how much your take home pay is.
If you’re a freelancer this might be a little challenging, so feel free to DM us and we’ll help you figure it out!
If you work for someone, multiple your pay check by how many of them you get a month.
Step 2: calculate how much you spend.
The trick to this is to look at your bank account activity over the last 6-12 months. Your bank actually gives you a total of how much went out and how much went in. Add everything up and divide by how many months you are looking at and you’ve got your answer.
For example, look at the last 12 months and add up how much went out each month. Divide that number by 12. That’s how much your average monthly expenses are. If you just got out of school, your expenses are going to be different. For example, adjust for rent if you now pay rent and adjust for food if you were eating at the dining hall before. Add car insurance and gas, if you didn’t have a car before. You get the idea.
Let us know the numbers you came up with or if you have questions about how to do this exercise.
Did you just graduate or are you graduating soon? Did Walter’s story seem all too real? We’d love to help you! Schedule a FREE consultation with us HERE.