How Broke Will You Really Be After Graduation?


College graduates face financial debt, budgeting, retirement, insurance and credit card debt after college.The first six months to a year after school can be challenging financially, especially because it's so hard to anticipate where you'll be - and how much cash you'll be making. Plus, there are more than a few surprises around the corner for recent college graduates, like how much car insurance costs, or how to decide what to contribute to a 401(k).

This cheat sheet will guide you through the six biggest post-graduation money shocks - and help you figure out how to avoid getting blindsided by them!


Base a Budget on Take-Home Pay, Not Gross Income

Gross income (you know, that annual salary number on your job offer – say, $30,000 for an entry level job) is NOT what you’ll be taking home each month. There are deductions for federal and state taxes as well as Social Security, Medicare, and benefits. If you elected to contribute to a retirement account, the number climbs higher (but that’s OK – see the last item on this list). The bottom line is, when you accept a job offer, never, ever base your monthly budget on gross income. A $30,000 dollar entry level job, which is $2,500 gross income per month, might actually translate to as little as $1,900 a month in take-home pay, or less, depending on your tax  status and where you live. Need to figure it out so you can estimate how much you can afford to pay in rent? Use’s free net income calculator.

Monthly Bills Will Add Up Faster Than You Think

On your own? Good, you get to pay the utility bills now. Oh, and you have to buy the groceries. And you need money left over for the cable, and the credit card payments, and the internet connection, and the gas for your car, and your health insurance, and your car insurance, and the cost of commuting, and the water bill… Sometimes, it seems like the sound of a single penny hitting the floor is the sound of freedom. (And if you took out student loans during college – well, there’s another monthly bill, and not a small one either.) BOTTOM LINE: Don’t leap into unnecessary additional bills (unlimited calling on your cell phone, perhaps, or a new car lease) until you’ve lived a few months on your own at your current salary rate. You might be surprised how little you can really afford. Don’t be afraid, when looking for apartments, to either (a) consider roommates or (b) knock on the neighbor’s doors and ask what they pay, on average, in utilities.

Think Deductibles Because You Will Need Insurance

Insurance. You don’t think much about it until you graduate. Before you graduate, you’re considered a dependent in the eyes of many insurance companies – and your parents are often footing the bill. So, for example, even if they lecture you about getting points on your license, you may not totally comprehend just how expensive car insurance is – especially for 20-somethings with bad driving records!

Then there’s health insurance, disability insurance, and now that you’re probably renting an apartment, renter’s insurance. And on all four counts, most recent grads and 20-somethings are woefully underinsured – which might not seem like a big deal while you’re young and healthy and accident-free, but if your apartment floods, you rear-end a truck, and need an emergency dose of antibiotic – well, you can financially ruin yourself in the space of about 10 minutes.

One of the smartest ways to find the best rates (and compare rates for insurance policies before you move to another city or state) is to use comparison sites and shop around online. You can usually shop for, compare, and even apply for polices online. Make sure you know what you’re comfortable paying for each month and that you have a good understanding of what your policy covers – many sites provide glossaries to explain what a deductible is, or how you can sign up for a Health Savings Account (HSA), among other fine points of difference between plans. For health insurance, try a site like  Mega-site is an easy quote-driven site that compares everything from health insurance to term life insurance, too.

Check Your Credit Report Before Applying to Jobs

Did you rack up massive credit card debt in college? What about student loan debt? Figure out what your credit score is (and what the number means) before you apartment-hunt or job hunt – both landlords and future employers may judge you harshly if your score indicates you’re an irresponsible spender.

Even if that’s not an issue, you’re going to have trouble getting personal loans, credit cards with reasonable rates, financing on a car or home, and more – and the emotional toll is enormous.  If you haven’t built good credit, it’s still possible to do so – we’ve got 5 tips to help you build credit here.

Don’t be fooled into paying money to review your report, either. You’re entitled to a free credit report from each of the three major credit reporting bureaus each year. Visit to pick yours up, free, now.

They Don’t Call it a Grace Period for Nothing

The “grace period” is that brief window (usually six months) between graduation and that first student loan repayment bill. Deferring a loan doesn’t make it go away – it keeps accruing interest! So plan for your loan payments, consolidate them if possible, and make sure you have a game plan. Paying them on time can actually boost your credit score considerably – and can reduce your interest rate with some lenders. Read our article about how to repay student loans on a budget.

When You Start Making a Dime, Start Saving A Penny

The irony about saving for retirement is, it’s better to start long before you’re even clear on what you’ll be doing in five years, let along  several decades. But if you’re smart, you’ll start taking a small portion of that first “real” paycheck and investing it starting now. You’ll thank yourself in years to come, and the high cost of an emergency or an early retirement will be a lot less to handle when the time comes.

School yourself in what your job offers, if anything, and then consider options on your own. Many retirement strategies can be started early. Read our cheat sheet on how to start investing your money young. You’ll learn the basics about 401(k) plans, IRAs, 529s, and other investment strategies there, which will help you get started.

About the Author: Lindsey Donner

Lindsey Donner, is a writer who graduated magna cum laude from NYU Gallatin School of Individualized Study in 2006. Her diverse experience includes working as managing editor of an English newspaper in Mexico and copyediting a novel about Cleopatra in the Czech Republic. In 2009, Lindsey launched her own design and writing consultancy, Well Versed Creative. Be sure to read her blog about the business of writing.

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