How to Manage Your Finances Once You're on Your Own

Guest Post Author:

Sarah Fudin currently works in community relations for the University of Southern California's 

online Masters in Education program, which provides aspiring teachers the opportunity to earn a 

Master’s degree and teacher certification online. Outside of work Sarah enjoys running, reading 

and Pinkberry frozen yogurt.

Being on your own after college can be an exhilarating experience. For possibly the first time in 

your life, you're supporting yourself and making your own decisions about financial issues. But 

with freedom comes responsibility. In order to avoid unwise spending and debt, it's important to 

start out on the right track by learning how to manage your finances early on. This article 

provides tips on four important "real life" financial tasks that recent college graduates should 

address.

1. Organizing Student Loans

Once you've graduated, it's important that you know the repayment schedule for each of your 

student loans since you're responsible for making payments on time. Learn how to use the 

National Student Loan Data System (NSLDS) to retrieve and track your loan information. 

Whenever you move, provide your lenders with change of address information and remember 

that you are required to make payments whether or not you actually receive a bill. In case you 

undergo financial difficulties that will cause you to miss one or more payments, gain an 

understanding of how you can reschedule your loan or request deferment to delay payment. 

Also, if you have multiple student loans, you may want to consider consolidating them to reduce 

the number of monthly payments you have to make and maybe even lower your interest rates. 

2. Acquiring Renter's Insurance

Most recent graduates begin their independent journey as renters. It's important to understand 

that your landlord is not responsible for insuring any of your personal property. In case of fire, 

flood or theft, you losses will not automatically be covered. Renter's insurance is an affordable 

option for protecting yourself from the misfortunes that you may incur as a renter. This 

insurance covers furniture, clothing, jewelry, electronic equipment and other items that may be 

damaged, stolen or destroyed. You can obtain renter's insurance from any insurance agent that 

sells homeowner's insurance. Some of the factors to consider when purchasing a renter's 

insurance policy are the amount of coverage provided, the deductible amount and whether you 

will be reimbursed for the actual cash value of lost property or the replacement cost. 

3. Filing Taxes

Everyone who earns an income above a certain level must file federal and state income tax 

returns. Filing a tax return means providing information that will determine if all of your required 

taxes have been correctly withheld from your salary and whether you are eligible for a refund or 

owe more taxes. Most recent college graduates will have simple enough finances that they can 

file their own tax return and avoid the expense of professional tax preparation. The best way to 

determine if you need to file a tax return is to visit the IRS website well before the April 15th 

filing deadline and follow the instructions regarding filing. The IRS provides tools like e-file that 

allow you to submit your tax return electronically. There are also commercial software packages 

and websites that will help you e-file both your federal and state tax returns.

4. Locking in Heating Oil Prices

In areas where heating bills are a major expense in winter months, energy companies frequently 

offer plans that allow you to lock in a rate for home heating oil during spring or summer, which will then be in effect throughout the winter. This will often result in savings since the price of oil 

typically climbs during winter months. However, there have been recent years when the price of 

oil has dropped, causing people who signed price-lock contracts to pay more than people who 

didn't. Despite the risk involved with locking in heating oil prices, it's still a good option for 

people who would rather not attempt to budget for fluctuating oil prices during the winter.

What You Need to Know About Bankruptcy and Student Loans

Bankruptcy, whether it's Chapter 7 or Chapter 13, does not absolve you of your student loans. Except for extreme dire circumstances, you still must repay your student loans!

The Chronicle of Higher Education reported on November 29, 2009 that Educational Credit Management Corporation held the federal student loans for roughly 72,000 borrowers in bankruptcy in 2008, but that only 276 (0.4%) sought a bankruptcy discharge for the student loans. Most bankruptcy attorneys won't even try to get federal student loans discharged. Of the 134 cases that have been resolved, only 29 (22%) had all or part of their student loans discharged.

Thus bankruptcy has little appeal for students whose debt is mainly in student loan form. Your best options lie in negotiating repayment with your lenders, either by yourself or with the help of a credit counselor. Your biggest card to play here is that lenders like money and lots of it. After all, it's their business. They'd like to get it all back with interest. But if it looks like they could lose it all, they may be willing to work with you to get at least some of it back.

This is an excerpt from Managing Your Money After College Guide which is included in our Real World 101 Care Packages. Visit our Care Package page to find out how to get one for yourself or for a lucky college grad!

Paying Off Your Student Loans

Now that you’re graduating, it’s time to think about paying off your student loan debt. Yes, you have debt and, in many cases, a lot of it. You may be asking yourself, “How will I ever buy a car, get an apartment or eat if I have to pay all these student loan payments?”

Well you’re not along in your worries; about two-thirds of students at four-year colleges and universities have accumulated student loans, according to the Project on Student Debt. That debt load averages $19,200 per student, and many graduates face the prospect of paying back more than that.

Where to Begin

Your first step should be figuring out who extended you the loan. Here are the possibilities:

• Your school
• Sallie Mae (the Student Loan Marketing Association)
• The US Department of Education
• Banks/Private Lender

If you don't know who your lender is, it doesn't mean your lender doesn't know who you are. You can find out who lent you the money by calling the Federal Student Aid Information Center Hotline (StudentAid.ed.gov) at (800) 4FED-AID or you can visit the financial aid office at your college.

Write down every student loan you have, including the amount, name and contact information for the lender. If you aren't sure, you can find details of your student loans by going to the National Student Loan Data System (NSLDS.ed.gov), the U.S. Department of Education's central database for student aid.

This is an excerpt from Managing Your Money After College Guide which is included in our Real World 101 Care Packages. Visit our Care Package page to find out how to get one for yourself or for a lucky college grad!

Your New Financial Life

After college your life will change, especially your financial life. The financial obstacles you faced in college are nothing compared to what you’ll have to overcome in the ‘real world.’

Here’s why it’s tough: your starter job will come with a low salary and maybe without health insurance. You might need to buy a car to get to and from work, or at least round up enough money to pay for the bus every day. Also, you'll probably have to replace some of your jeans and sweaters with office clothes. Rents are high, and there’s a litany of hidden expenses in the life of a twentysomething: deadbeat roommates who “share” utilities but never actually write their checks; friends’ weddings that require costly dresses, gifts, and travel; security deposits and agent fees every time you move; medical care that’s not covered by insurance; needing everything (furniture, work clothes, wheels, kitchen gear) at the same time, and, yes, college loans. And there’s still more…

Breathe.

Don’t freak out.

By learning about how to manage your personal finances, you will minimize the challenges you’ll face in your twenties.

But I Don't Think I'll Be Able to Understand It

The subject of personal finance can seem intimidating. It includes topics like taxes, insurance, investments, and interest. At this point in life, you don't need to learn about dividend reinvestment plans or yield spread premium. You do, however, need to worry about budgeting your income to meet all your expenses, dealing with credit cards, and paying off college debt. When you begin learning about these topics, you'll find that personal finance is not all that complicated.  Most personal finance and money management ideas are just good common sense.

The Real World 101 Managing Your Money After College Guidebook will help break down all the decisions you have to make and actions you have to take into easy steps. We’ve made this book small enough and short enough for you to keep with you and refer to whenever you feel lost and don’t know the next step.

Think of it as your crash course in money management. The goal? To help you become financially independent and self-reliant as you continue your education or enter the first few years of the working world.

This is an excerpt from Managing Your Money After College Guide which is included in our Real World 101 Care Packages. Visit our Care Package page to find out how to get one for yourself or for a lucky college grad!

Real World 101 Founder Featured in BusinessWeek Article About Student Loan Debt

Recently, I was interviewed by BusinessWeek for an article, "A Steep Climb for Indebted College Grads," about how student loan debts have overwhelmed many graduates. The article gives a fascinating look at whether or not the overwhelming cost of college is worth it. The article makes a great point:

The average college graduate who borrows the full cost of tuition and fees at a public university will be 33 before accumulated net earnings catch up to counterparts who enter the workforce directly from high school—after factoring in tuition costs, interest, and earnings foregone during the years in school—according to the College Board study.

In the article, I share a bit about my story and how my own struggle with student loan debt inspired me to start Real World 101 to prepare other college students and recent graduates for life after college.

Here's an excerpt from the article:

Take Patricia Hudak. Now 24, Hudak got her bachelor's in marketing and management from New York University's Stern School of Business in 2006, graduating with $160,000 in private student loan debt. In interviews for entry-level marketing jobs, when recruiters asked what kind of salary she was looking for, she would suggest $50,000 or $60,000 a year—the minimum she figured she'd need to make her $2,000 monthly payments. "They sort of just looked at me like I had two heads," Hudak says.

Hudak moved into her parents' home in Jersey City and has been doing freelance work while trying to start her own business, Real World 101, which will sell to colleges and individuals guidebooks and other products designed for new grads. Her middle-class parents, who themselves did not attend college, pay her student loans, although Hudak plans to pay them back. "It's easy for me to say, 'Oh, I have all this student loan debt,' but I chose to take it and I have to deal with the consequences of that choice," Hudak says. "So many people in my generation think of everything as a short-term investment with immediate return."

I know that many of the readers out there struggle with student loans and I'd love to hear your story. I believe there is a better solution out there to conquer this growing problem and if we share our stories and struggles maybe a change can come.

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