Money Makeover Series: New to the Workforce

Recent college graduates often spend so much time looking for work after graduation that they forget what to do with their money when they finally land that first professional job. The first thought is to go crazy! After years of getting paid by the hour in high school and college, a salary might feel like a windfall.  But with this new phase in life often comes new responsibilities such as rent and student loan debt. Read on to find out how our Money Makeover Participant, Krystle, is preparing for her financial life now that she’s new to the workforce.

When I first spoke to Krystle, she was still looking for her first professional job and doing temp work to make ends meet. She went through some difficult times financially and emotionally, wondering if she’d ever achieve her dreams – as so many college graduates do. By the time I’d spoken to her again, she’d just landed her first job! We could then figure out how to allocate her new salary to prepare a solid financial future for herself.

Getting Everything in Order

The first thing Krystle and I had to do was find out what her financial picture really looked like. Working as a temp couldn’t possibly pay all of the bills so tough decisions had to be made – but now there’s an opportunity to get it all in order and start paying things off. However, the process of getting everything in order is harder than it seems!

Luckily Krystle had a good idea of what she owed and to whom, but if you’re not so sure in your own life, then a great place to start is your credit report. By pulling up your credit report you literally have a list of your debts and creditors and therefore a starting point. Since Krystle already had this information, our next step was to find out how to optimize her payoff strategy.

Optimizing the Debt Payoff Strategy

The first thing I noticed in Krystle’s list was that she had smaller bills which weren’t attached to a credit card company and therefore could be put on a payment plan – such as medical debt. Believe it or not, most hospitals will give you a payment plan on your medical debt if you call and ask them. It may not always be the simplest process, but it’s totally worth it if your monthly budget is limited! Another option is to consolidate debt into one loan if you need to pay off multiple credit cards.

There are some very helpful federal government programs for student loan borrowers. If you have student loans like Krystle does you can look into programs like the IBR or Pay As You Earn Program to help lower your payments once your grace period is up. Remember, there’s no point in setting up a debt payoff strategy until you’ve found every way possible to optimize your debt situation. That means looking into programs that could help, asking your lender to lower your interest rates, and setting up payment plans when possible. Once you know you have the best possible debt situation, then you can move forward with your debt payoff plan.

Creating Balance and Making Hard Decisions

After working to optimize her debt in every way possible, Krystle and I started talking budgets. We listed the things that she pays for each month and deducted each and every one from her new take home pay. Unfortunately, her new take home pay came up slightly short. Something needed to be cut. Since Krystle wasn’t spending frivolously on anything and, in fact, was quite frugal, this was a pretty tough decision. I then realized that one of her bills was monthly tithing –  money she sends to her church. I asked her if it would be possible to put that on hold for a few months until she had some of her smaller debts paid off.

Now bear with me, asking Krystle that question wasn’t an easy thing to do. Giving to charity is a decision that no one who does it takes lightly, and I didn’t want to take this away from her. However, I couldn’t see any other way to make her budget balance. Still, Krystle was firm in her stance that she needed to continue making this donation. One might think that cut our budget talks cold, but it didn’t!

That’s where the balance comes into making hard decisions. If you aren’t earning enough money to cover all of your bills and there is literally nothing you can cut from your list, then it’s time to think about what else you can do. If you have the right background, you can try to find a job that would cover the expenses for one. There are some firms that do the hard work of job placement for you and some of them are quite specialized for more advanced professions. For example, if you are looking for a psychiatric position, you could contract with a psychiatry recruitment firm.

However, in Krystle’s case, earning extra money is the best option. Luckily, she still had a relationship with her temping agency and has even been taking on some extra shifts! We determined that if she picked up one extra shift every other week, she would have plenty to cover her tithing. If she picked up one extra shift every week, she would have even more money to apply to her debt payoff. Now comes the second phase of making hard decisions.

How hard are you willing to work and at what point is it too much? Krystle has just started the job of her dreams and if working an extra day per week causes her to lose sleep and thus her performance at work to suffer, then she will lose rather than gain in the long run. But if she’s still used to the grad school lifestyle of lots of work and little sleep, she may be able to pull it off just fine. At this point, she has a week or two to really think about it and decide because this isn’t an easy decision to make!

To Be Continued…

As Krystle spends time thinking about how much extra she can work while still performing well at her day job, think about what you can be or are doing in your own life. Do you need extra money but haven’t considered taking on a side job? Or maybe you’re working a side job but you’re working so much that you’re burning the candle at both ends. Following the extremes never works. Consider what you need the most and find ways to achieve that without letting everything else suffer and also without making the goals so large that you’re scared to even try to pursue them. Krystle is taking her financial future one step at a time, and in doing so, taking her mental and financial health seriously. Soon we’ll know exactly what she plans to do!