Are your friends preparing to go off to college while you go straight into the workforce? You’re not alone. According to an April 2018 report from the Bureau of Labor Statistics, 66.7 percent of high school grads ages 16 to 24 were enrolled in colleges or universities.
Many high school graduates don’t seek higher education because they’re afraid of getting saddled with student loan debt. And that isn’t an unfounded fear. In the past decade, those ages 50 to 64 have seen their student debt spike from $43 billion to $183 billion, according to a 2016 report from the Government Accountability office.
If you aren’t planning to go to college, you can still achieve long-term financial success — if you’re careful in how you manage your money.
“By not going to college, you get a four-year head start on earning, but you probably will earn a bit less in your prime years. That means it’s important to start out strong with a retirement plan and a savings plan,” says Mike Sullivan, a personal finance consultant with Take Charge America, a national nonprofit credit counseling and debt management agency headquartered in Phoenix.
[See: 12 Millennial-Inspired Ways to Spend Less.]
Still, if you skip college, you may earn less than those pursuing bachelor’s degrees — and maybe a lot less. On average, college graduates in 2015 were earning 56 percent more than high school graduates, according to 2017 data from the Economic Policy Institute.
If you aren’t planning to attend college and you want a healthy financial future, employ these effective money-saving strategies.
Don’t rush to move out. “Live at home as long as possible. It will probably cost less to stay with mom and dad and will make saving easier. If you can’t stay home, find a roommate to help reduce living costs,” Sullivan says.
Keep in mind, your rent is going to be the most expensive item on your budget. The national median rent for a one bedroom apartment is $940, according to ApartmentList.com, an apartment search website. Of course, what you’ll pay depends widely on where you live. According to a 2016 GoBankingRates.com study, rent for a one-bedroom apartment in San Francisco is around $3,600 a month. In Indianapolis, you may find a one-bedroom apartment for around $732 and in Wichita, Kansas, you may pay as little as $470 for a one-bedroom apartment, according to the report.
If you can put off paying for your living quarters for a year or two or more, you may be able to better ease into adulthood rather than possibly taking on too many expenses at once.
Save money. Everyone should start saving money early on, but if you decide to skip college, building your savings is increasingly important.
“You have no student debt and will be receiving income several years before college graduates. Use this to your advantage,” says Matt Hylland, a financial advisor in North Liberty, Iowa.
You’ll want to save money for a variety of reasons. You’ll want money for an emergency fund , down payments for future purchases such as a car or house, and you’ll want to start saving for your retirement.
“It may seem like a lifetime away, but it’s important to have money saved for retirement,” says Tyler Dolan, a certified financial planner at the Society of Grownups, a Boston-based financial education organization dedicated to helping people in their 20s and 30s manage their money.
[Read: 6 Money Management Mistakes Millennials Often Make.]
“If you’re working for an employer, start contributing to their retirement plan. If you’re working for yourself, contributing to a Roth or traditional IRA may be the best place to start,” Dolan says. If you are working for yourself, there are a number of online brokers you can use to open up an IRA, including Merrill Edge, E-Trade and Ally Bank, to name a few.
“Start saving early because you get even more time for compound interest to work for you. Even if your income is lower, being able to save some money early on can give you an advantage over the long run,” Hylland says.
Hylland offers the example of a high school graduate saving $3,000 a year for the next 35 years. With a 6 percent annual return, Hylland says that the high school graduate’s savings would grow to about $335,000. However, for a college graduate who begins saving five years later, in order to save $335,000 in 30 years, he or she would have to save $4,200 a year.
“Even though you may have a lower salary than a college grad, you have the opportunity to get your money compounding much earlier,” Hylland says.
Begin building credit. “Get a credit card,” Dolan says. “Believe it or not, having a credit card and managing it responsibly is a great money strategy for a high school graduate who is just starting out in the real world.” If you don’t have a job yet, first get employed, and then apply for a credit card. Keep in mind, it will be harder to pay it back if you don’t have a healthy stream of revenue to pay any debts you accrue, and if you’re under the age of 21, you won’t be able to successfully apply for a credit card without showing proof of an income, like a pay stub or W-2.
Just make sure you’re financially responsible and know that you’ll pay off your credit card debts in full every month before applying. Otherwise, you may soon find yourself deep in credit debt, which will hurt your ability to borrow from lenders later on. You also want to make sure you pay all of your bills on time, since unpaid bills, or bills paid months after a due date, can wind up on your credit report and make you look like a credit risk to banks.
[See: How to Talk to Millennials About Money.]
“If graduates don’t start building their credit history right away, they may have trouble down the road if they want to apply for a loan to buy a vehicle, rent their own apartment — some landlords can check your credit report — or buy a condo or home,” Dolan says.
It’s one thing if you don’t want to go to college, but managing your money is one subject you don’t want to fail.
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3 Smart Money Moves to Make if You’re Not Attending College originally appeared on usnews.com
