Sorry Santa, Christmas isn’t my favorite time of the year. Rather, it’s the week between graduation and Memorial Day weekend when the soporific graduation speeches have ended, the weather is glorious, and the Georgetown campus is Thoreau-like tranquil.
If you’re one of the millions—yes, millions—of students graduating from a U.S. college or university this year, however, graduation is the beginning of your new life, one free of regular exams and course assignments. So, congratulations and enjoy your celebration activities. And after you’ve patted yourself on the back enough times, please consider the following post-graduation tips.
Georgetown students all smiles at graduation (Photo by Phillip Humnicky).
Phillip HumnickyTip #1: If you don’t have a job, or a thoughtful plan to continue your education, then land a job ASAP.
Recent research shows the longer you go unemployed, the more difficult it is to find a job. This doesn’t mean you should take the first job offer you receive, but it shows how costly an employment gap can be. If you have interviews lined up at multiple firms, especially late-round interviews, turning down a job offer can make sense if you’re convinced the job isn’t right for you. However, if there’s any chance you would accept the current job offer, ask for an extension until you’ve heard from the other firms you’re considering. And, if the offer is from a comparable or aspirant firm, don’t be shy about informing the others of this offer because it will likely improve their impression of you. Time is not on your side, though, so think carefully before rejecting a job offer if you don’t have another firm offer.
If you don’t have any job prospects, it’s understandable if you feel insecure or even desperate, but you must fight these reactions because they’ll cause you to ooze more negativity than a Washington Capitals fan after yet another early exit from the NHL playoffs. Although I’m not a career coach, I’ve observed enough students in this situation to know that a healthy dose of dark humor can be helpful in this fight against negativity. I recall one student who had been turned down for countless jobs and, in the best tradition of dark humor, “threatened” to send a response that went something like:
Dear ___:
I received your letter rejecting me for employment at your firm. Unfortunately, I’ve received many such rejection letters, and I cannot accept them all. Therefore, I must reject your rejection and will begin working at your firm next week. I look forward to working with you.
This student, of course, didn’t send this letter, but he had a good laugh with it, and it seemed to reduce his stress. He soon received a job offer, and I believe his good-humored attitude and, most importantly, willingness to accept good advice, were keys to his success.
Tip #2: If you receive multiple job offers, consider all of your compensation components.
It’s easy to compare base salary offers, but other compensation components can represent a significant portion of a job’s total compensation, especially if they’re non-taxable. For example, every $1 your employer contributes to your 401K plan is equivalent to about $1.5 in salary you wish to save for retirement, assuming your tax rate for federal, state, and local taxes is 33% (i.e., 1/(1- tax rate)). This salary-equivalence multiple also applies to non-taxable benefits such as employer contributions to health care coverage, and educational assistance.
Accounting for all of your compensation components, of course, doesn’t mean you should simply take the job with the highest total compensation. Other factors such as the firm’s prominence (i.e., working at a high-profile firm can improve your future earning power), work culture, and location are important factors to consider. Unless you’re independently wealthy, however, your total compensation is important, and it’s critical to account for every compensation component to make an apples-to-apples comparison of job offers.
Tip #3: Eliminate bad debt.
As I’ve noted before, bad debt is money you owe that costs more than you can expect to earn on your investment(s). For example, the average credit card rate is more than 16% this year, and that’s higher than the plausible expected return on virtually any other investment. If you have outstanding credit card debt and other investments, then you’re almost surely better off selling these investments to eliminate as much credit-card debt as possible. Be sure, however, to check with your tax advisor on the tax consequences of any investment sales.
If you’re employed and your employer matches your 401K contribution, this is one example of an investment with a higher return than paying off credit card debt. A one-for-one match, for example, represents an instant 100% return. It can make sense in this case to delay paying off your credit card debt to take advantage of this benefit. Few, if any, other investments, however, are likely to offer a better return than paying off your credit card—and other high-interest—debt.
Tip #4: Continue to live like a student.
The research literature shows a generally positive relation between money and happiness. Yes, I know this sounds like it was published in the journal Duh because more money means you can consume more, but it’s good to know that it’s been documented empirically. More recent—and less intuitively obvious—work, shows a positive relation between deferred consumption and happiness. So, even if you’re graduating debt-free with a high-paying job, there’s something to be said for continuing your low-cost student lifestyle for at least a while after graduation. If you’re not employed or you’re in debt, then monastic should be the first adjective that comes to mind when describing your lifestyle.
Although I’m embarrassingly bereft of many personal wise decision making examples, I actually did act wisely according to the above cited research. I lived so frugally after beginning my first post-graduation job, that one of my colleagues asked—with genuine concern—if I needed to borrow some money after I ordered the cheapest menu item at a Dutch-treat lunch. My answer was that the last thing I needed to do was to borrow more money because I had so much student debt.
Even after I paid off my debts, I continued to live frugally and save money. I then slowly adjusted my spending habits upward as my income rose. Indeed, one of the benefits of getting older—and I can assure you there aren’t many—is thinking back to when I was younger and couldn’t dream of affording the things I can now (like ordering the most expensive lunch menu item occasionally).
So, congratulations again to the Class of 2017. I hope you enjoy your graduation ceremony, and you find these tips—and the video version of them shown below—helpful. And don’t forget to thank your professors for sitting through yet another series of graduation speeches that would devastate Zolpidem sales if they were recorded and expertly marketed.
