Q & A: I’m a recent graduate. To spend or to invest?

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Information by: Department of Education

The cost of student debt has been increasing over the past decade.

The transition from college to the working world has always been seen as a huge step. It’s no more fully depending on your parents, but rather living on your own. Many grads wonder what’s next, to get a job, go back to school, or travel.

But while students are trying to figure out what’s their next move, they are stuck owing for their education. In 2016 grads averaged just about $38,000 (in college debt) which has increased from previous years.

The cost of student debt has been increasing over the past decade.

Information by: Department of Education

The cost of student debt has been increasing over the past decade.

It takes a time to warm up to the real world. You just have to learn what to invest in and make smart decisions along the way. Recent grad Ryan Williams of Western Michigan University has not yet landed a full-time job but in the meantime, Williams needs to know how to manage and invest his money properly now that he is finished with school and has major responsibilities.

Below are questions asked by Williams which were answered by Dr. Charley Ballard a professor in the Department of Economics at Michigan State University.

Starting to Invest

Q: I always thought about investing in stocks, but how exactly do I begin? Are there certain companies that I should take interest in?

A: Investing in stocks is a lot to manage because it requires you to literally invest, as in doing your research on your personal time. Many people invest in what they call an index fund which is the reflection of stocks or bonds in a very popular market. The reason why the index fund is such a smart move is that your personal investment is widely spread across a variety of businesses and it lowers the risk of losing value.

You can purchase an index fund through a brokerage firm or a mutual fund company. But typically if you don’t have a huge initial contribution, to begin with then look for funds that allow you to make small or even monthly payments.

Trickling Down Student Loans

Q: Once I get my first full-time job how should I break down my salary to help pay off my student loans?

A: Never over stress about paying off your student loans. Take care of what’s important first which is eating, rent, and other bills. Recently the federal government has changed their policy about paying off student loans, now you can limit your bill to about 10% of your personal income but for more details I recommend (studentaid.ed.gov).

But also I tell my students if you ever get a hold of some extra money stash it to the side to help pay off your loans. Don’t put it towards a boys or girls trip but rather prioritize your spending.

Saving for Huge Investments

Q: I currently need a new car or truck preferably a truck so how might I save up to buy one?

A: It is all about keeping a budget. First write down all of your living expenses which are your basic necessities such as food, rent, utilities, and transportation. That typically takes up half of your salary. Second, write down your loans and whichever percentage you’re paying towards it. Which should now leave you to your savings and entertainment expenses.

It is all about discipline and whether you have it or not. Some work more than one job to bulk up their saving but it all depends on the individual’s workload. If you ever need assistance there are now apps that you can purchase or already free that will help you such as: QuickBooks Self-Employed, Mint, and Qapital.