Dark Bilious Vapors

The (frugal) graduate by Laura Vanderkam (Writer, USA TODAY contributor): has this fun-filled screaming column about the trials and tribulations of achieving Adult-dom and Financial Independence after graduation in today’s world:

”About to graduate from college? If you've been reading much, you could be forgiven for thinking you should cower under your Star Wars comforter at Mom and Dad's house after collecting your diploma. The media buzz: Becoming a financially independent adult is as tough for today's grads as Hercules' labors (which you can now safely forget) were for him.

Yes, according to the chatter, rising student loans, credit card debt and stagnant wages conspire to keep you a "Twixter" (Time magazine), unable to grow up. You can call yourself a member of "Generation Debt" (Village Voice) — or "Generation Broke," the title of progressive think tank Demos' recent study claiming current economic realities make the path to adulthood more perilous for Generation X and Y than baby boomers ever experienced. The study's co-author, Tamara Draut, has written a forthcoming book called Strapped: Why America's 20- and 30-Somethings Can't Get Ahead.

Not depressed yet?

It's enough to make you charge some $89 pumps in despair. But here's a secret you won't hear in the rush to blame young people's woes on everyone except themselves: Society hasn't lost its ladder to financial stability. Young people have just lost interest in starting out poor.

I want it now!

Too many 22-year-olds expect to start their adult lives at their parents' level of material satisfaction, without the 30 years of labor it took them to get there. Our world of easy credit and mysteriously glamorous TV apartments says you can have it all now. But live like you're entitled to your parents' finances, and you'll be back living with them soon enough. Live within your means, though, and you'll achieve financial independence before the naysayers say it's possible.

Not convinced? Let's look at the economic realities young grads face. Talk to Draut of Demos and she'll tick them off: Average student loan debt rose from about $9,000 in 1992 to $18,900 in 2002. Real wages climbed only 5% to 7%.

"Young people are not having a hard time making it because of their color TVs and stereo systems," she says. To prove that, the "Generation Broke" study presents the average budget, based on consumer surveys, for a 2001 graduate (we'll call him "Grad") earning the average new hire salary of $36,000 a year. On Grad's take-home pay of $2,058 a month, after paying for rent and utilities ($797), car payments, gas and auto insurance ($464), food ($456), student loans ($182) and credit card minimums ($125), he has $34 left. Total.

Hello Star Wars comforter!

Closer inspection, though, finds that our average Grad's "average" budget isn't smart for someone who's young and poor and intends to live like it. How do I know that? I graduated in 2001 myself — and I would have jumped at Grad's miserly $36,000 starting salary. My first job in the Washington, D.C., area had me taking home $1,200-$1,500 a month. So I shared a house with three girls. I took the bus to work and bummed rides. I grocery shopped and packed my lunch every day. I bought suits at discount stores. As a result, I saved enough that first year to spend three weeks traveling in Asia the next summer. Unlike our Grad, I never paid a cent of interest on my credit cards.

Steak ... or ramen noodles?

But maybe I'm weird. I like Ramen noodles. So I ran the Demos budget by Deborah Taylor-Hough, Seattle-area-based author of Frugal Living for Dummies. Is $456 a good monthly food budget for the average 22-year-old? I asked.

She laughed. Uproariously. "Maybe if you're eating steak and caviar." Or, more likely, shelling out $7 a day for lunch and eating take-out dinners five times a week. Unlike Grad feeding only himself, Taylor-Hough feeds a family of five on $500 a month.

She doesn't feel deprived. "Living true to your priorities isn't deprivation. It's a choice," she says — a very adult choice to say "no" to impulses and "yes" to things you want more. She wanted to stay home with her kids, so clipping coupons instead of grabbing take-out and driving old paid-off cars (at far under $464 a month) were the price.

If you have big goals and little money, you've got a choice, too. You can fund a lifestyle like your parents' with the credit cards that make "affluence" easy. That's what most young people do. That's why the average indebted 25- to 34-year-old has $4,088 in credit card debt. Or you can hunt for cheaper housing — under $797. Sure, student loans squeeze a budget, but a $182 payment is the difference between buying a suit at Macy's or Filene's Basement. Bike to work and you'll be rich.

Frugal living isn't easy; grocery shopping, for instance, takes skill. If parents won't teach these skills, colleges should. Why not entertain listless seniors with frugality workshops, paid for by the sin money that school officials get for co-branding credit cards? Entice an audience with free cookbooks or Tupperware. Then drill them with advice such as "Don't give yourself a new car as a graduation present," says Gary Foreman, who's the editor of The Dollar Stretcher. If your wheels die, buy a car coming off lease and "let someone else soak up that big depreciation."

Live like you're young and poor and your savings will fund your financial freedom. No need to sleep in your childhood bedroom. Put the too-cute shoes back on the rack, and you won't have to.”

Karen on 05.16.05 @ 06:53 AM CST