New York Times  |  March 23, 2011

Graduating from college and looking for a job is hard enough. But recent college graduates must also learn how to manage a budget–often with a salary lower than they hoped for–as well as juggle saving for retirement and paying off student loan debt.

With national student loan debt surpassing $1 trillion, many young people grapple with how to successfully pay off the debt they took on to attend college or graduate school.

The New York Times featured a story about one such recent graduate, Courtney, and I weighed in as the financial expert. While there are no easy answers, some strategies are certainly better than others. You can read Courtney’s story and my advice here.
From the article:

Lauren Lyons Cole, 29, is a certified financial planner in New York City. Her concern about Ms. McNair’s situation is the risk of taking on more loan debt than she will earn when she graduates. “I see that so many young people don’t understand that $40,000 a year, $50,000, even $60,000, it just really doesn’t go far,” she said.

But to Ms. McNair, that kind of salary seems comparable to winning the lottery. Asked about her dream financial situation, she replied, “I’d find a job that paid me goo-gobs of money to do what I love.” Her definition of “goo-gobs”?

Something around $25 an hour. Or $52,000 a year.

Ms. Cole said Ms. McNair was wise to pursue a graduate degree in a field where there were jobs. But she was underestimating the salary she should ultimately shoot for, given her education and skills. “Nobody’s telling her that she has to work on Wall Street or sell her soul,” Ms. Cole said. “But the reality is life is expensive.”

To that end, Ms. Cole said a good practice run for Ms. McNair, in terms of placing a higher value on her abilities, would be to ask her father for a raise. Ms. McNair has been working for the family foundation for a year. (She did at one point jokingly ask for a better title — director of curriculum development instead of assistant director. Her father told her to get her master’s first.) And Ms. Cole said Ms. McNair should find out what other tutors in the area were paid and charge accordingly, instead of simply telling clients to pay what they can, which is what she is currently doing.

Ms. McNair does not assign high priority to a high salary. And that’s partly because her parents emphasized to her that money cannot — and does not — solve all problems. “It’s not necessarily a matter of needing more money,” said her mother. “She can get more money and still be chronically broke.” But money does pay the bills, assuming you manage it well. Greg McNair said the family did not talk much about money and certainly not about handling it, as the children were growing up.

So, Ms. Cole said Courtney needed to cover the budgeting basics. Forget about retirement and other long-term goals. For now, she needs to figure out her cost of living and what’s left over.

Ms. McNair earns about $1,200 a month. Her fixed monthly expenses, including the car, phone, credit card bills and payment on the one student loan she has not been able to defer, total around $1,000. That leaves about $200 in wiggle room. Ms. Cole urged Ms. McNair to set up an automatic deposit of $80 into a savings account every month and then give herself $30 a week for everything else. “When it’s gone, it’s gone,” Ms. Cole said. “It might be a struggle for Friday and Saturday for the first few weeks, but you start adapting to the behavior and spend smarter during the week.”


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