3 Financial Realities New Grads Have to Face

financial challenges grads face

Go to college, study hard, get good grades, land a job and rake in the money. Sounds pretty simple, right?

Not so fast.

The truth is there are a number of financial realities new graduates have to face in order to be successful with their money.

If you’re thinking about attending college or are already in a program, prepare yourself for these realities now before you find yourself out of college and overwhelmed by your finances.

Here are some situations you might find yourself in after you step off that stage in your cap and gown.

1. The Necessity of Dealing With Student Loan Debt

The average student debt load is now nearly $30,000, according to a report from the Institute for College Access & Success. The report looks at the class of 2012: 71% of them had student loans and graduated with an average of $29,400 in debt.

This is quite a bit of debt – a financial reality of great proportions. And, with the majority of graduates finding themselves with student loan debt, this is a problem worth addressing. Oh, and not only is it a problem, it’s a problem that has become worse over time.

While it’s not reasonable to expect everyone to graduate without debt, it’s certainly worth encouraging them to try and avoid debt. In fact, it’s very possible to graduate from college with no debt, and there are a few ways to achieve that goal.

First, you may want to consider working through college. Perhaps you can get a part-time job while you’re in school to help cover the cost of tuition and books. This can work well if you’re still living with your parents during college when you have fewer expenses.

Second, apply for as many grants and scholarships as possible. You never know what you could get if you don’t apply.

Third, by joining the service — the National Guard, for example — you can earn benefits to help pay for your education. (I wonder how I know that?)

You can also mix and match these ideas to help pay for your college tuition.

College debt can hang over your head for years and years after graduation. Do you really want that weighing you down? Think about all the interest you’d pay on your student loans, not to mention the opportunity cost!

The opportunity cost of paying interest on debt is the value you would have received by putting that money into an investment. Not only would you be paying the interest, but you’d lose the ability to invest and make money off of that money.

However, there is some good news for those of you who are already graduating with student loan debt:

First, you might be able to get a high-paying job. That isn’t always easy, but it’s possible. And what can you do with all that newfound income? You guessed it — pay off your student loans!

Second, if you’re going to become a teacher, you might qualify for teacher loan forgiveness. You can see if you meet the requirements listed on StudentAid.Ed.Gov.

Third, some employers will pay off your student loans under certain conditions. The medical profession has been known to be especially generous in paying off student loans.

Student loans aren’t the only source of grief for many graduates. Sometimes finding a decent-paying job is just as frustrating.

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2. The Difficulty of Finding a Decent-Paying Job

Let’s face it: Minimum wage jobs just aren’t cutting it these days.

The federal minimum wage is currently $7.25 per hour. Say you work 40 hours per week, 50 weeks out of the year. That means you’ll make $15,000 per year. According to the United States Department of Health and Human Services, if you have two people in your family unit, you would be below the poverty line at that wage.

But hey, that’s why you went to college, right? So you could get a decent-paying job?

Unfortunately, not everyone does so right after college. I know people (and you probably do, too) who graduated college and are making much less than they originally intended with the degree they now hold. Low-paying and minimum wage jobs aren’t robust enough to handle student loan debt. That’s a problem.

For many people, locating a decent-paying job means searching in some unlikely places. And the competition can be fierce.

The fact of the matter is that it takes time and effort to find a decent-paying job. Many college graduates aren’t prepared for this extra work of finding a good job after they graduate. Depending on their field of expertise, they may even need to become an entrepreneur and start their own company to find decent money.

So if you’ve recently graduated, invest the time necessary to find a job that can support you and your family. Don’t take the first measly job you come across. Set high expectations for yourself and your income.

This is one financial reality you can’t afford to overlook. Also, if you do have student loans you can’t afford, and subsequently fall behind on them, you could severely hurt your credit. (You can see how your student loans affect your credit by getting a free credit report summary on Credit.com.)

3. The Urgency to Start a Retirement Plan

Compound interest is a wonder. But you know what it needs? Time.

When you graduate from college and find your decent-paying job, it’s more important than ever to think about retirement. Why? Because compound interest needs time to grow.

Barbara Friedberg provides a simple chart that displays what would happen if the value of a penny doubled every day for a month. Guess what? On day 31, the doubling of the prior day’s funds equals over $10 million.

Granted, nobody can expect the stock market to have this kind of performance, but it does show the power of compounding interest.

Just in case you missed the point: start investing for retirement as soon as possible! You can make a lot more progress on your nest egg if you start early with time on your side.

Want another reason to start retirement investing early? Many employers are no longer offering generous pensions and are instead encouraging their employees to invest on their own. Even some 401(k)s don’t provide a healthy match! Unfortunately, many employers are more concerned about their bank accounts than their employees’ retirement plans.

That’s why you need to face the financial reality that you are in charge of your retirement. It depends on what you do and the sacrifices you make for the future.

By reducing or eliminating student debt, searching far and wide for a decent-paying job and investing early for retirement, you may be able to face these difficult realities with strength and confidence.

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This article originally appeared on Credit.com.

This article by Jeff Rose was distributed by the Personal Finance Syndication Network.