In March 2007, Danialle
Foy, a 29-year-old administrative assistant in Chicago, carried nearly $4,000
in credit card debt, $3,200 in student loans, and $11,000 in car loans. By
next January she'll be debt free. While Foy wishes she could chalk up her
financial success to a generous raise or year-end bonus, her household income
stream has remained the same.
"Up until last February, (my husband and I) lived paycheck
to paycheck and still had debt," Foy recounts. "We had no idea where our
money was going and I just got tired of it. I thought 'I don't want to do
this anymore. Why are we 28 and poor?'"
Like many 20-somethings, Foy dug her way out of debt
through careful budgeting. Saving all household receipts for a month, Foy
calculated how much she and her husband spent and then devised a simple
budget for groceries, rent and utilities, household and pet expenses, emergency
expenses and entertainment.
"I budget for everything and we take out cash for the
things we buy," Foy says. "If you use actual bills to pay for things, it's
harder to overspend. You won't have 45 ATM charges you forgot about."
a budget is one of the simplest and most effective strategies recent
graduates can use to limit spending, says Dan DeKeizer, a vice president
and actuary in MetLife's Retirement Strategies Group. By learning to live
on a budget early, recent grads not only save money now, they also set themselves
up to save increasingly larger sums in the future.
"Learning to live on a budget is especially important
to a 25-year-old because if you can live on less when you're young, you
can put salary increases directly into savings," DeKeizer says. "You'll
also have the advantage of more compounded
interest on your savings."