It is graduation season and so many of our graduates are getting hundreds and thousands of dollars for completing what seems to have been the hardest years of their lives. Gosh if they only knew that this was just the beginning! Either way, people travel from far and near to celebrate this accomplishment and when they do, they usually come bearing gifts. When graduating from undergrad, students usually receive anywhere between $500 and $1500 but this amount could vary depending on their network. Now, while receiving money is a good thing, many graduates never make it to the bank with their money and here is why:
1. It is time to turn-up!
For most graduates, undergrad was filled with ups and downs, with the downs usually out-weighing the ups. So, graduates feel like they are entitled to a post-graduation turn-up to celebrate getting through such “hard” times. Thus, they party. Some for one night, others for two nights, and if it was really a struggle, they might end up partying every weekend for a month. And graduates don’t just go to the club! Those days are over. These days graduates are buying sections, bottles that come with sparklers, and some even rent out entire venues. But no matter how they decide to turn up, they usually pay very little attention to the cost. After all, the experience was worth the money.
2. Hit ’em with the flex!
While this might seem somewhat similar to the first reason, there is a significant difference. According to the Urban Dictionary, to flex means to put on a fake front, to fake it, or force it. Graduates love to flex. They go out and buy gucci flip flops, red bottoms, Versace, and every other article of clothing and jewelry being promoted by Drake and Future. However, the reality is, they can’t afford it. I mean honestly, I still can’t afford these things and I’ve finally moved away from hourly pay. Nonetheless, these graduates buy all of these things, just to take pictures and post on Instagram, but a month later they end up doing the #BowWowChallenge trying to keep up that image. Seriously, it’s like tax season all over again.
3. Spending before you get it.
One thing that is very common, but not just for graduates, is this idea of spending your money before you get it. A lot of people make a list of things they want to buy or plan how they will spend a specific amount of money before they actually have that money in hand. As graduation approaches, a lot of students have started to think about things they want to buy and the list continues to grow until they receive that money. The problem is that sometimes they have subconsciously spent ALL of the money and it may not occur to them that there may or may not be more money coming to replace the money they spend. So, they go out, spend the money on their list of things, and then once the money is gone, they have to pray or hope that someone will send a late card with an extra $100.
4. Out-standing debt.
Education is not cheap and young people are taught that getting a college education will put them in a position to make decent money. Now, while this is generally true, most students leave college with debt they can’t afford to pay right away or debt that will take them ten plus years to pay off even if they pay it consistently. However, if they are lucky and don’t have loans, they could potentially owe the school.
In this situation, the school might allow them to participate in the graduation ceremony but they won’t receive their diploma until they pay that outstanding balance. Not receiving that diploma can make a student feel as though they did not really graduate; therefore, some students will decide to use their graduation money to pay that balance. Not many can argue with anyone spending their graduation money this way.
Additionally, there are students who get credit cards to help soften the burden of getting through college and may still owe on those credit cards. Some might use their graduation money to pay off a credit card or to simply bring their balance to good standing.
Either way, it is common for a graduate to use a portion of their graduation money to pay off some form of debt.
5. Lack of financial literacy.
This is probably the most common reason why a graduates money never makes it to the bank and it can turn out to be very detrimental to a young persons future.
So many young people have not been taught the value of money, how to save, or how to budget. A lot of graduates leave college and do not have a clear sense of how important a credit score is to their future. Some do not understand how interest works and how you can literally pay for a car twice before you actually own it. Additionally, not many know about the stock market and how to invest their money. All of these things are essential to ensuring they are not making financial mistakes.
So, what can graduates do to ensure they break the cycle? I’m glad you asked! Here are a few tools that can be used going forward.
1. Mobile Banking Apps and Banking Registries
Since so many of us are constantly on our phones, there is no reason why you should not have your banks mobile app on your phone. Use it! Check your account as often as you deem necessary so that you are aware of the money that is coming in and money that is going out.
Use a bank registry! Yes the paper thing, that looks like a spreadsheet, which is usually given to you when you open a new account. Record ALL of your spending and check it against what your bank displays on the mobile app. Doing this can help you catch transactions that look “fishy”.
2. Learn how to budget.
One budgeting tool that you might find useful is Mint Budgeting. Mint can help you build your budget and will hold you accountable. With Mint you can link your bank account to your budget and Mint will send you updates on how close your are to each cap you have put in place. For example, if you tell Mint that you will spend no more than $100/month on groceries, it will analyze where your spending and then notify you as you get closer to hitting that $100 grocery limit.
3. Explore ways to invest.
Whether you invest in a mutual fund, an IRA, or just a standard 401K, it is important that you start investing young. The earlier you invest, the better your chances are for a comfortable retirement.
Among the many places that you can use to explore your investment options, I would encourage you to reach out to my Soror Chelsea Phillips of Phillips and Associates. She can definitely guide you in the right direction!
To request Miss Phillips’ contact information, please use the contact page and include your investment interests.
4. Get your debt under control!
This is a must and I’m sorry to inform you that there is no magic trick you can perform. You simply must pay off your debt! For the purpose of my advice, I am referring to debt outside of your student loans.
You can start combating your debt by exploring your credit report, locating small amounts of money that owe, and paying them. Setup a payment plan, something you can manage, and stick to it until you have paid off that specific debt. Once that debt is paid, move on to the next. If you can pay on more than one debt at a time, do it! You won’t regret it because as things fall off of your credit report, your credit will improve and whether you like it or not, having good credit is important.
Saving can be hard but when you save, you position yourself to be able to handle incidentals. The first step to ensuring the success of a saving commitment is being honest with yourself about why you do not save.
For example, I know that if I see the money, it is very likely that I will spend that money. My Grammy would say, “that money is just burning a hole in your pocket, huh?” At first I did not know what that meant but as I have matured, I began to understand it as whenever I knew I had money, I always got the urge to spend it. Most days I know that God is on my side because I will walk into the mall ready to spend and will not find a single thing I like. But even still, I had to be real with myself and say if you see the money hit your account, you will spend it!
As a result, I decided that I would split my direct deposit. I opened another account at an institution that would require me to physically go to the bank to get the money out. If I am being completely honest, I live in DC but I opened an account at Redstone in Huntsville, AL – which meant I would literally have to drive 10 plus hours to get my money. Yes, I am that bad. Additionally,I did not get a bank card because I wanted to minimize the chances of me getting desperate, and accepting a $4 ATM fee, just to get the money. Ultimately, I did my direct deposit paperwork to ensure that the desired amount would go directly to that savings account and not to the account that I access at least 20 times a week.
Now, this has worked for me and if you are anything like me, I suggest you do something similar. However, if your spending habit is not as bad as mine, you are probably better off. BUT, whatever is keeping you from saving, you have to be honest with yourself about it and work to find a solution that works for you.
There are several tools that can help you get started and one tool that you might want to explore is the Dave Ramsey Program.
This article was written at the request of a recent graduate but I hope that other young women can find this useful.