Everyday Cheapskate: Paycheck 101: A College Graduate’s Guide to How to Handle a Paycheck | Lifestyles

There you are, a college graduate with your new degree in one hand and a new job in the other – or the confidence that you’ll have one soon. For years you’ve waited for a real job with a real paycheck to get a decent car, an apartment, and a respectable wardrobe. After all, these are the things you so deserve for nearly starving to death for so many years.

Well, not so fast, Buckaroo. Before we do anything, we need to go over the basics of running a paycheck — a small detail you might have overlooked in the courses you took to prepare for the real world.

You may have calculated your annual salary – a number that makes you see dollar signs. This is your gross salary. Don’t fall in love with it. A $35,000 annual salary, when reduced by 30% for “withholding” for taxes, Social Security, etc., and then divided into 52 weekly paychecks, suddenly looks more like $470.

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As a fully fledged adult earner, you should adopt a personal standard for managing your paychecks. It’s not how much you earn that matters. It’s how much you keep. Make it a personal rule to live on 80% of your net income, whatever it is. Get used to it now and you’ll get through life as your income increases. Ignore this wisdom by living more than you earn and your suffering is just beginning.

You must control your real expenses, starting with the essentials. I can predict a few for you: housing, food, insurance, fuel. You may have other essential expenses if you arrived at your first job with a load of debt behind you, in which case you should consider paying your student loan and paying off your credit card as essential expenses.

If there’s one critical mistake you could easily make right now, it would be buying or leasing a new car. Get that idea out of your head. You can’t afford a car payment. And even if you think you can, you can’t. You’ve survived so long with that old clunker; you can do it a little longer.

If you can’t become someone’s roommate (or multiple roommates to keep your spending down), consider moving home for a while, if they accept you. Believe me, the parent of adult children: if you come home with a grateful spirit, do your own laundry, clean up after yourself, carry your weight in chores, act nice, help with meals and do beautiful things for your parents — you will be welcomed with open arms. In fact, they may be begging you to stay – at least for a while until you get up.

Yes, I know you have a credit card. And if you start seeing it as part of your spare cash, you’ll be dead in the water in no time. Which is why I want you to put this thing away. Far and safe. Your carefree years of living on plastic are over.

If you have student loans, you may qualify for a six-month grace period before you need to start paying back. But you don’t have to wait that long. Start now and you’ll pay less interest. You will learn from your lender that there are several payment plans. Go to the Federal Student Aid website for a guide to paying off your federal student loans.

In conclusion, probably the most valuable aspect of your upbringing was the part about learning to live with next to nothing, finding out how to get by. You may need to do this for a few more years as you get your financial bearings. As a bonus, you will find financial freedom while you are still young.

If you follow what I say, one day you will thank me.

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