Wednesday, April 25, 2012

The Unofficial Post-College Handbook

(Before I begin, I want to make a disclaimer: I am not a financial advisor or a life professional. I'm a regular guy who is going through the process of buying a home. I'm merely giving my opinions on what you should do to avoid mistakes upon graduation from college.)

Pour out the stale beer from the 3/4 drank cans all over your living room and return the kegs to the store, kids; it's time to graduate. While I'm sure you're reading a plethora of "professional advice" columns telling you how to act professional in interviews, to delete all your college photos from Facebook and to tweet professionally on Twitter, I'm going to give you some words of wisdom: You can still have fun after college. Most of your co-workers are just like you, despite what the so-called "be professional" types say. ESPECIALLY if they're unmarried and sans children. You will grow up naturally when you realize your body just can't go like it did in college, and when you realize you have to focus on your job every single day you walk through those doors.

Upon graduation you will realize you have two options: live life to the fullest, or plan ahead. I chose to plan ahead and the advice in this post follows that philosophy. I'm not saying my way is right or wrong, I'm merely giving my opinion as to what I think is a reasonable course of action. Here's why I think planning ahead is so important: You may not realize it now, but when you apply for a home loan, banks will meticulously analyze your entire history for the previous two years of your life. And in today's banking market, it is ridiculously, RIDICULOUSLY hard to get approved for a home loan because the bank simply will not let you buy beyond your means anymore. Therefore, the first two years out of college are the most important. If you want the dream of homeownership and stability as soon as possible, I highly recommend following these steps.

Rule #1: Live at Home After College, If Possible

This is everything you did not want to hear, but it's true: stay there as long as you can stand it. Now, there is a reasonable expiration date (no one wants to be late-30's "oh I live with my ma" guy), but it is the wisest, and smartest move to live at home until you get your financial mess in order. Use this time to pay down your student loans and set yourself up for the future. You WILL thank yourself 5 years down the road.

I've lived with my parents for two and a half years after college. In that time I have been asked "Why?" a million times and have seen many a friend who didn't move out of the city move to fun places in Cleveland. Now I can definitively answer why I stayed home: in that time I have bought a nice car, paid off the loan for that nice car AND saved up for a down payment on a mortgage for a house without needing to purchase Private Mortgage Insurance (PMI).  Now, some of you can't live with your parents for a multitude of reasons. I understand that and that's ok, to each their own. But if you can stand it, and work close enough to home to do it, I strongly recommend it.

Rule #2: Find a Reputable Company to Work For

This part is easier said than done, and my advice comes from my own mistakes. Without getting into detail (and I have my reasons why), I took the first job I was offered out of college for a company with a less than stellar reputation in the Cleveland Ad Agency field, and that decision came back to bite me. Because of that decision, it is hurting my chances to get my loan approved (but it will happen, rest assured). You want to work for a company with a known reputation of excellence in the city you work. I can't begin to tell you how many times I told fellow ad agency professionals "Oh, I work at ______" and their response was either a blank stare or "Who? Where?" That hurt my job search when the inevitable screwjob from the company occurred. Fortunately for me, everything worked out in a new career path, but I will never forget the lowest of lows. 

Trust me: find the right company, not the first company. Your life and your finances will be far more stable.

EDIT: I can't believe I forgot this, but remember this: Do not, DO NOT, DO NOT, DO NOT marry yourself to your company via social media unless it's for LinkedIn (a network that's supposed to be professional). You may be excited that you've been chosen by your company for your first job, and you may love your job at first, but let the shine wear off and you'll wish you didn't. And if you work for a big company, even more of a reason not to link your social media accounts to your jobs. I married myself to my first job and it was one of the biggest mistakes I made when it was time to change careers. You may or may not leave on the best of terms.

Rule #3: Car First, House Later
While most people would think the next logical step post-college would be to save up to move out, I disagree. Why? If you're like most college students, you're driving a ticking time bomb that is turning into a money pit of repairs and headaches. This may sound like crazy talk to those of you who can't wait to move out of your parents' basement, but it will save you hundreds in headaches and repairs later: buy a newer car first. You can choose brand new or lightly used, but I don't recommend an older car because you will find yourself in the same situation all over again in a few short years. Another reason to purchase a car? It helps build your credit rating for that house you want. Assuming you make the payments, of course. Don't buy anything stupid or beyond your means. You aren't ready yet for the brand new Bimmer. Buy something safe and fuel efficient and affordable to repair, and if you're into it, a hint of sport. (That's why I chose the Ford Fusion)Then, once your car is paid off and you can finally afford that house, you have a car that you won't have to worry about for at least 5 years. With regular maintenance, of course.Rule #4: Save for the 20%-25% Down Payment
This is going to take some financial discipline on your part, but you will thank yourself in the long run. Yes, you CAN buy a house with a small down payment. Just because you CAN, doesn't mean you SHOULD, especially in this housing market where loans are hard to come by. If you buy a home and put down less than 20%, you have to buy what's called Private Mortgage Insurance, or PMI. This is costly in the long run. Plus, your monthly payment will be so much higher by putting less down that you're probably stretching yourself too thin anyway. You will save several thousand dollars, and will have a much more manageable monthly payment if you simply bite the bullet and keep saving until the time is right, unless you see a situation simply too good to pass up.
Rule #5: HAVE FUNNow that I've scared you, it's time for a GOOD reality check: post college is not all doom and gloom. While you will look back on a few years ago and ask yourself "When did I become boring?" the truth is you haven't. You and your friends still do the same crazy things you did in college, just in more sophisticated locations. Many of your new co-workers are just like you, especially if they're without kids. They like to go out, have fun, and be young, even if they're a few years older. Despite what the "professional advice" columns say, you don't have to make your Facebook squeaky clean and you can keep being the same person you were before in social media (DISCLAIMER: Unless you're an idiot who posts about clearly illegal, offensive or unethical things, or your social media accounts are for professional purposes) The whole key is to be smart about it and have balance.  The decisions you make now are the most important when it comes to setting up your 30's and 40's. BUILD A SOLID FOUNDATION FIRST, and not only will you be better off in the long run, but you will be prepared in case a rainy day comes.
Enjoy your new adulthood! It's not as bad as you fear.

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