By Henley Tullos
Students looking forward to graduation from college often face the uncertainty of taking over responsibility for their expenses and student loan debt from their parents.
Chris Pope, senior lecturer in finance at the Terry College of Business at the University of Georgia, said students can prepare to take over the expenses that were covered by parents during a student’s undergraduate years.
“The best thing to do is make a budget when you first get your job,” Pope said.
Pope warned against living beyond one’s means within the first months of a job out of college to ensure that students are valuing their money properly and budgeting towards a more secure future.
Pope suggested to his finance students that they begin budgeting before graduating so as to start a good habit.
“I think it’s good to get in the habit of putting money away early,” Pope said. “Save when you’re young because when you get in the habit, you’ll be consistent and never miss the money.”
After college, UGA senior Brad King plans to use his paychecks wisely.
“I plan on saving about 25 percent of every paycheck that I get and putting it in a savings account to use that for my first few months of expenses after graduation and from then on using the paychecks that I get from, hopefully, the job that I have,” King said.
King’s parents currently cover all of his expenses month-to-month and are covering his tuition to relieve him from future student loan debt.
King’s experience differs from many other students who will incur thousands of dollars in student loan debt, and Pope offered the most efficient way for a student to pay that money down.
“Pay as much of it at the front end because interest is what you pay on student loans and I think interest can sometimes be 6 or 7 percent,” Pope said. “So if you’re letting them go until maturity, there’s a significant amount of interest you’re going to have to pay.”
Pope was adamant about students paying down their loans with the highest interest first, such as private student loans and credit cards.
“Every dollar you pay up front saves you significant interest over the course of the term of your loan,” Pope said.
In offering advice to students graduating as soon as December of 2018, Pope said to start saving money young and to not plan on having Social Security and Medicare in their older years.
“The government is running on a lot of debt, so I wouldn’t count on anything being there,” Pope said, referring to the federal government’s assistance programs. “So save money for yourself and have enough without relying on any other sources of income when you retire.”
Pope suggested that students use apps such as Acorns and Robinhood to help with budgeting and investing in an Exchange Traded Fund (ETF), which will diversify money among different stocks to help avoid investing all their eggs in one basket.
His overriding advice, however, is to avoid trying to live beyond one’s financial resources.
“I think the danger for young folks is racking up debt and then it just starts snowballing on them,” Pope said.
Henley Tullos is a journalism student at the University of Georgia’s Grady College of Journalism and Mass Communication.