Thursday, May 19, 2005
For the graduates
Too many 22-year-olds expect to start their adult lives at their parents' level of material satisfaction, without the 30 years of labor it took them to get there. Our world of easy credit and mysteriously glamorous TV apartments says you can have it all now. But live like you're entitled to your parents' finances, and you'll be back living with them soon enough. Live within your means, though, and you'll achieve financial independence before the naysayers say it's possible.
Not convinced? Let's look at the economic realities young grads face. Talk to Draut of Demos and she'll tick them off: Average student loan debt rose from about $9,000 in 1992 to $18,900 in 2002. Real wages climbed only 5% to 7%.
"Young people are not having a hard time making it because of their color TVs and stereo systems," she says. To prove that, the "Generation Broke" study presents the average budget, based on consumer surveys, for a 2001 graduate (we'll call him "Grad") earning the average new hire salary of $36,000 a year. On Grad's take-home pay of $2,058 a month, after paying for rent and utilities ($797), car payments, gas and auto insurance ($464), food ($456), student loans ($182) and credit card minimums ($125), he has $34 left. Total.
Hello Star Wars comforter!
Closer inspection, though, finds that our average Grad's "average" budget isn't smart for someone who's young and poor and intends to live like it. How do I know that? I graduated in 2001 myself — and I would have jumped at Grad's miserly $36,000 starting salary. My first job in the Washington, D.C., area had me taking home $1,200-$1,500 a month. So I shared a house with three girls. I took the bus to work and bummed rides. I grocery shopped and packed my lunch every day. I bought suits at discount stores. As a result, I saved enough that first year to spend three weeks traveling in Asia the next summer. Unlike our Grad, I never paid a cent of interest on my credit cards.
Not convinced? Let's look at the economic realities young grads face. Talk to Draut of Demos and she'll tick them off: Average student loan debt rose from about $9,000 in 1992 to $18,900 in 2002. Real wages climbed only 5% to 7%.
"Young people are not having a hard time making it because of their color TVs and stereo systems," she says. To prove that, the "Generation Broke" study presents the average budget, based on consumer surveys, for a 2001 graduate (we'll call him "Grad") earning the average new hire salary of $36,000 a year. On Grad's take-home pay of $2,058 a month, after paying for rent and utilities ($797), car payments, gas and auto insurance ($464), food ($456), student loans ($182) and credit card minimums ($125), he has $34 left. Total.
Hello Star Wars comforter!
Closer inspection, though, finds that our average Grad's "average" budget isn't smart for someone who's young and poor and intends to live like it. How do I know that? I graduated in 2001 myself — and I would have jumped at Grad's miserly $36,000 starting salary. My first job in the Washington, D.C., area had me taking home $1,200-$1,500 a month. So I shared a house with three girls. I took the bus to work and bummed rides. I grocery shopped and packed my lunch every day. I bought suits at discount stores. As a result, I saved enough that first year to spend three weeks traveling in Asia the next summer. Unlike our Grad, I never paid a cent of interest on my credit cards.
