For most college students, life post-commencement means freedom. And yet, many recent graduates entering the real world find themselves suffering from sticker shock.
“Literally everything,” one 23-year-old from New York said of what costs surprised her the most after graduating. “Rent, self-care, entertainment, food, basics — it's all SO much.”
Today’s cost of living is mind-boggling. And, for recent college graduates, navigating the financial climate can be especially rough. On top of being saddled by massive student loan debt — the average student loan debt for the class of 2017 was $39,400, up 6% from 2016 — salary prospects simply don’t match up to the skyrocketing costs of living. So we did a callout to see how recent graduates were handling their finances after graduation. We heard from 50 young professionals, most of whom were women, under the age of 25 from across the country to gain some insight on how they prepared to strike out on their own after graduation, and what has surprised them the most along the way.
After the mortarboards are tossed and the dorm room's packed up for the last time, planning ahead for how to navigate unfamiliar financial terrain isn’t necessarily straightforward. “To be completely honest, I don't think I did that much research as I should have but what are you going to do now,” one San Francisco-based 22-year old grad said.
Many fresh grads told us they had not done any research at all. For those who had, they looked into basic things — like a 401(k) plans and airline credit cards and doing comparative research to find the best deals for gyms, transportation, and utilities — but the overall consensus was that they wished they had done more research.
“All the financial pieces slowly came together for me,” a 24-year old based in San Francisco said. “I definitely didn't know most of it before I set out on my own.”
Given that most of the folks we spoke to didn’t do much to prepare before venturing on their own, you might be surprised to hear that most of those we heard from had some sort of savings after graduation. However, the amount varied, from $100 to several thousand, and some had no savings at all after graduation.
“I did not have anything saved,” said one 24-year old based in Washington D.C. “I come from a low-income family in which I am in the first generation to graduate from college. I wish someone had told me how expensive those first few months immediately post grad would be.”
While some of the people we heard from who had savings were able to continue saving at a nominal rate, most of them depleted much of the savings they did have. “After graduation, I traveled for several weeks and kind of depleted my savings,” a 24-year old who is currently saving for grad school said. “After that I had between $1,000 and $1,500 in my savings account.”
Many recent grads’ bank accounts were drained by unexpected expenses, including apartment furnishing, health-related costs, or travel. But, it’s worth noting many of these were related to professional development, whether buying a wardrobe for work, moving to a new city for a job or taking an unpaid (or underpaid) internship. “I got an offer for the unpaid internship of a lifetime and moved to D.C. two days after walking the graduation stage,” one grad said, noting that moving from a small college town to one of the most expensive cities in the country was financially “terrible.”
Another Midwest-based graduate had a similar experience: “I had a little over $4,000 saved after graduation [but] it went [down to] a couple grand after I moved to Florida for a marketing contract position at Walt Disney World,” she said. “I built it back up to near $5,000 during the seven months I was there [and] after moving back to Milwaukee I am back down to $4,100 after paying more moving expenses.”
For the few of those we heard from who had been financially supporting themselves long before graduation, not much was surprising. But for others, the realities of financial independence were overwhelming, especially when factoring in student loans and health care. “The costs that have surprised me the most are my student loan payments, cable bills, furniture and car insurance,” said one 22-year old.
While some of the people we heard from were still covered under their families’ health insurance, there was a perceivable air of unease among them when it came to thinking about shouldering these costs alone. “Luckily I'm still covered until I'm 26, but just looking at the costs has been shocking,” a recent grad in San Francisco said. Some people even tried to avoid going to the doctor to keep from incurring medical bills, but others — like one Washington D.C.-based graduate — didn’t have that option: “I have had a couple shoulder surgeries this year and no one prepared me for being 23 and sick.”
When it came to rent and living expenses, most everyone was shocked by the actual costs. Even though buying property is off the table for many young professionals, rental prices are still steep. The average U.S. worker needs to make a minimum of $21.21 an hour to afford a modest two-bedroom apartment, and must make more in major U.S. cities where rents are higher than national averages. For many recent grads — for whom the average salary out of school is $50,556 — financing these costs is no easy feat. “All of [the] expenses that come with settling into a new city and apartment adds up and is needed to be paid immediately,” one 24-year old said. “I maxed out credit cards quickly and carried a high balance for over a year in order to establish myself.”
Ultimately, everyone’s situation is different. Some recent graduates have a safety net while others don’t; some need to make additional considerations, such as health care costs, that others don’t even have to think about. And, though the financial world is scary, the only thing scarier is being unprepared for it. “I did a lot of reading on how different people split their income between savings and spendings to decide how to distribute money,” one 23-year old from Chicago said. “[But] honestly, I wish I had done more research.”