The young and the penniless

By Helen Anne Travis, Times staff writer
Published October 12, 2007

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You're 25 years old, fresh out of college or grad school, and you're psyched to start working, bringing in the big bucks and living the high life.

And then you get your first job and see that your starting salary is barely half of what you expected.

Sound familiar?

"It's a common mistake to come out of school with a heightened level of confidence," said Jon Wax, 35, CEO of Waller and Wax Associates in Tampa. Wax learned this the hard way. He graduated from college in the middle of a recession and found that employers were less than welcoming to - or willing to pay - new grads.

But Wax survived (note the CEO status) and so will you. Your starting salary is just that, and it will get better.

But in the meantime, here are 25 tips for all you 25-year-olds out there making $25,000 or less.

Shelter

1. Get a roommate. Living at home could save you money, but it could also really suck, especially if you've spent the last four (or more) years with complete freedom. A few of my friends have boyfriends that live at home, and they have very interesting stories of encountering surprised mothers in the middle of the night. Rent is a huge expense, but roommates can help. The same advice goes for roommate and apartment-hunting: Use every single resource imaginable. Facebook, MySpace, Craigslist, your school's networking services, your new job's message boards. You never know, Lucie in HR might have a cousin who noticed a for-rent sign on her block. That guy who sat next to you in Economics might have a buddy looking for a roommate in Seminole Heights.

2. Rent in unexpected places. Don't assume that you can't find cheap rent in the desirable centers of town. If you dig around Hyde Park in Tampa and the Old Northeast in St. Pete you might find small studios that are a lot cheaper than the big apartment chains. Drive around and keep your eyes peeled.

3. Trade cable for Netflix. The movie-rental service is cheaper than cable. The two-out-at-a-time plan is only $13.99, the three-at-a-time plan is $16.99. Standard cable could cost you more than double that. If you absolutely can't live without a constant update on Jim and Pam's romance, bring a community 12-pack of Natural Light over to a friend's house on Thursday nights to watch The Office.

4. Wash your clothes the right way. Cool water washing machine cycles are cheaper than warm ones. Air-drying your dishes costs less than running the hot-air dry cycle.

5. Wrap your windows in foil. You'll be classy when you make more money. In the meantime, putting aluminum foil on sun-facing windows keeps you cooler during the summer ... until your landlord demands you take the foil down. (The Department of Energy's Web site, www.energy.gov/forconsumers.htm , has tons of other money-saving tips.)

Take care of yourself

6. Don't skimp on health insurance. It's hard when you're at the peak of your health to justify dropping an iPod's worth of bucks each month for health insurance. Before I got insurance from my employer, I paid approximately $100 per month for an insurance plan that would pay up after I met a very large deductible. It was basically there to help me if I went through a car window, not if I had the sniffles. If money's tight, it might be worth it to talk to mom and dad and ask for help with your health insurance expenses. "Everybody should have health insurance, regardless of cost," says Wax.

7. Look good for cheap. The Aveda Institute in St. Pete offers reduced price haircuts and color services from its student staff. But grab a book, the students have to check with their teachers at every step of the service. Highlights can take hours.

8. Use a condom. Seriously. Babies are costly. Don't make the mistake of having one you can't afford.

Work a little harder

9. Find another way to make money. Take an honest look at your skills and see if there is any way they can make you a few extra bucks. Freelance. Pass out flyers. Babysit. Clean houses.

I am a big fan of promotional work. Companies will pay big bucks (I found one gig that paid $25 per hour) for you to pass out their products at events. I've conned college kids into signing up for credit cards - hey, they got a free shirt! - and yeah, it feels terrible. But that guilt goes away a month later when a check for $100 comes in the mail. Craigslist is a great way to find these gigs, but be wary. If it sounds like a scam, it is. A $100-an-hour data entry gig? Scam. Someone who needs their living room walls painted? Worth checking out. And never sign up with a company that charges you to work.

10. Think about taxes. If an employer takes your social security number, you'll have to pay taxes. Expect to put aside a quarter of your extra earnings for Uncle Sam.

Have (cheap) fun

11. Buy cheap clothes. Shop for jeans, black dresses, slacks and other wardrobe basics at discount stores like Ross and Marshalls. Keep in mind that a lot of the stuff is cheap for a reason, and inspect it for overall quality. However, Seven jeans are the same whether you buy them for $30 at Burlington Coat Factory or for $80 at Neiman Marcus. And don't forget thrift stores.

12. Dine in. Eat out as little as possible. I did some calculations and found that my daily lunch of a tuna sandwich (chunk light, no albacore on my wages,) chips and pear cost less than $10 a week. You could easily spend that in one Panera run.

13. Sneak a mini into clubs. Yes, it's so lowbrow. But nothing saves you money at a club or concert like two 1-ounce bottles of 99 Bananas in your back pocket. Keep them sealed while you're in transit, though - open-container fines will blow all the money you saved by scrimping.

14. Memorize drink specials. The next time hit your favorite bar, make a note of the weekly specials, and plan to return on those nights. Sites like www.partybor.com , www.813area.com and www.happy-hour.net catalog cheap drafts, wells and buckets at area clubs. Or you can just call each bar before you head out.

15. Don't buy pricey toys. Live like you're in your 20s, not your 40s. Don't rush to buy that high-end boat, car or plasma TV. "You don't want to be in your 30s still making payments on items purchased, used and discarded years before," said Wax.

16. Drive carefully. Speeding, aggressive driving and perfecting your Tokyo drift can lower your highway gas mileage as much as 33 percent - to say nothing of all the tickets you'll get. Get regular engine tune-ups and car maintenance checks to avoid gas guzzlers like worn spark plugs and dragging brakes.

17. Date during the week. You can still be a heartbreaker on $25,000, you just have to be creative. Cook your honey a meal at home and watch your Netflix movies during the weekend. Most money-saving specials are offered on weekdays.

18. Nighttime shows. Catch plays by Jobsite, the Tampa Bay Performing Art Center's resident theatre company, for as cheap as $10. The reduced-price performances are generally the day before a play's opening night. Call the ticket office at (813) 229-STAR. American Stage in St. Petersburg has an occasional pay-what-you-can Tuesday night performance. And they really mean pay what you can. No one is going to snub you if you can only drop $5 on two tickets. For dates, call the box office at (727) 823-PLAY.

19. Day dates. Every Thursday night you can check out the Dali Museum for $5 from 5 to 8 p.m. The museum also features movies on the first and third Thursdays, free with paid admission. The films are either inspired by Dali, featuring Dali, or related to an exhibit. The films run until February. Lowry Park Zoo knocks its admission down to $3 four times a year. The next discount day is in January. Visit www.lowryparkzoo.com for dates.

Get out of debt

20. Consolidate your loans. If you have a large amount of student loan debts, consolidate them. You can lock in a 4 percent or 5 percent interest rate. Don't rush to pay these guys off at this stage of the game. "As long as you have a fixed low rate (on your student loans,) focus on budgeting and accumulating investment wealth," said Wax. The low-interest rates of student loans are nothing, and you might even be better off putting extra cash in a high-yield CD or savings account. You'll make the big bucks soon enough; until then, add $10 on your minimum payment.

21. Pay off your credit cards. You want your credit card debts gone as soon as possible. Any extra money - tax returns, bonuses, etc. - should go straight to your high-interest lenders. I called my credit card company last year and told them I had been offered a better rate by a different company (small lie.) Wouldn't you know? They lowered my rate by almost 10 percent. Now, the credit card companies aren't dummies. They know what kind of rates you'll get after those glittery no-interest periods end. Pick a reasonable rate, and give it a try.

22. Consider consolidating your credit card debt. Consolidating credit cards to one low-interest card is a great way to save money on interest. But don't make the mistake of consolidating and continuing to charge purchases. "You don't want to fix a problem if you're going to be making more problems," said Wax. Consolidating credit cards is a commitment. Stop spending. (The Motley Fool's Web site has a free worksheet that helps you figure out how quickly you can get out of your current debt load. Go to www.fool.com , look under products and services follow the link to How-to Guides.)

Save!

23. We repeat: Save! This seems counterintuitive, but the best thing you can do to help your money situation is save. Put aside $25 a week for when your accountant friends want you to join them on a long weekend trip. Play tricks on yourself to save. Eat lunch at your desk and move that $5 you would have spent on takeout from checking to savings as a reward. Brew a pot of joe in the office instead of going to Starbucks, and reward yourself with a $3 donation to your savings account.

24. Every penny counts. Bank of America has a plan that rounds your debit card purchases up to the nearest dollar. The difference is then put in your savings account. Wachovia says on its Web site that you can set up automatic payday deductions to move money from checking into savings. No matter which bank you choose, check the rules for overdraft fees and minimum balance requirements.

25. Plan for retirement ... now. You're never too young to think about your retirement. According to Wax, if you put aside $20 a month from ages 21 to 55 - a total of $8,100 - you could have $42,100 by the time you retire. Say you make $30,000 and put aside 10 percent for retirement. Over the course of 34 years you would have more than a half-million dollars - and that only required a $102,000 investment on your part. Compound interest rocks! (These figures assume your savings average an 8 percent interest rate and that taxes are deferred until the money is withdrawn. Oh, and these estimates also assume you keep your paws off your investments until you retire.)

[Last modified October 11, 2007, 18:12:27]