This article was written by my friend Amanda L. Grossman, the creator and writer of FrugalConfessions.com and TheDrugstoreGame.com. She writes about ways to live in frugal decadence so that you can enjoy today without sacrificing your future.
There is something very unique about being a college student. You get to live parent-free among people your age, be mostly in charge of your own schedule, and live with the sole purpose of getting yourself an education.
Something else that is very unique for most college students is the experience of living like a poor student. You may be racking up student loan bills on the side, so perhaps if we sat down and calculated how “poorly” you are living the numbers may not stack up. But in general, your college student lifestyle—buoyed by federal work-study and weekend wages—is probably the cheapest you will ever assume in your lifetime.
As you graduate and enter your first summer of freedom—whether that be living back home at your parents’ house until you are ready to fly the coop, striking out on your own, and/or starting that first job—I want you to think about doing something that can give you a tremendous leg up in your finances for years to come.
I want you to consider continuing to live like a poor college student.
I Lived Like a Poor College Student after Graduation
When I graduated college in 2005 I had approximately $36,000 in student loan debt. Even though I gained so much from my college education and really saw it as an investment, it felt like I had a $36,000 noose around my neck. I knew that I had to work hard to loosen this noose, and so I set out to live as cheaply as possible from the start.
I was lucky enough to score a job right out of college with a starting salary of $40,000. Because the company was in the same town where I had just lived as a student for the previous four years, it seemed natural to continue living like a poor college student. And boy am I glad that I did!
I found an ad for someone asking for a roommate in an off-campus townhouse. The townhouse was just two blocks from my new company, and the person seemed nice enough so I signed up for the next year. Since my new roommate was still in college at the time, I had the place to myself for Christmas break, spring break, and several months out of the summer. What a great deal!
Having a roommate to split the bills with meant that my monthly expenses of rent, utilities, and electricity came to just $380. Work was two blocks away, so I only had to fill my tank with gas once per month. I also had no car payments because I kept the same beater car I had had for the last several years. I cooked all of my food at home, and brown-bagged all of my lunches (my groceries cost just $200 per month).
How Living like a Poor College Student Helped My Finances
Instead of allowing lifestyle inflation to creep up and snag most of my new pay, I was able to use most of my paychecks for paying off my student loans and growing my savings account. Once a few thousand dollars was saved I paid off my first $2,500 loan. Fortunately for me, the student loan interest rates were extremely low and I was able to consolidate the lump of my student loans into one loan at an amazing 2.25% interest (after 36 consecutive payments, this was further reduced to 1.25%). Consolidating these loans into a low interest rate meant that more of my payments were going towards principle instead of towards interest.
At the end of just one year out of college with an income of $40,000, I was able to max out my Roth individual retirement account (IRA) contribution, put $10,000 in savings, and pay down over $7,000 of my student loan debt.
Beating Lifestyle Inflation
I am not completely different from the Average Joe; I also experienced lifestyle inflation as my paychecks increased and my student loan debt decreased. However, for the first several years after college I continued to live like a college student. That is what made all of the difference. My student loans were paid off within 5 years instead of the 11 years Sallie Mae would have preferred. During that time I also fully funded a Roth IRA, built up an emergency fund, and saved for a down payment for a house. Living like a poor college student gave me a future.
Here are some ideas for how you can sidestep lifestyle inflation at least for the first few years after graduating college and get a head start on your future finances:
- Cost of Living Matters: Evaluate the cost of living in whatever area you are thinking about settling down in. This can make a huge difference in allowing you to pay off your student loans versus just working to survive.
- Learn a Few Consumer Hacks: Learn how to play the drugstore game in order to pay pennies on the dollars for all of your toiletries. This can save you hundreds and thousands of dollars (to give you an idea, I have scored $2500 of free products over the last four and a half years)!
- Beat Boredom with Free Entertainment: Seek out forms of free entertainment, such as parks, free museum days, and free movies.
- Shop at Thrift Stores: Purchase new work clothes from thrift stores. You will be amazed at what you can find for next to nothing.