This story, "More Advice Graduates Don't Want to Hear," ran Saturday and has been haunting the Most Emailed List ever since.
Your Money columnist Damon Darlin scolds grads to save 10% of their income first, put raises away into savings, and avoid that pesky latte habit (geez, you'd think Starbucks was responsible for the financial downfall of our entire country). But I don't think his breakdown of the average grad's finances really adds up, because he totally ignores debt and other common extenuating circumstances.
"If you are only making $40,000, a not-untypical starting salary for a college-educated professional in a big city, the weekly gross of $769 works down to $561 in take-home pay after income taxes and payroll taxes for Social Security and Medicaid," he writes. "Were you to divert 10 percent of your salary to a 401(k) plan, the bottom line becomes $509."
Is his $40,000 typical? According to the College Board (pdf), for 25 to 34 year olds who are full-time year round workers, yes. Obviously, you'll make less if you are at the beginning of that age range, if you are like the 30 percent of the young workforce who finds part-time or otherwise contingent work, or if it takes you time to find a job, or if you change jobs, or if you find a job outside a big city, etc. Oh, and liberal arts grads can expect to be making more like $31,333, says the NACE.
But let's stick with the $40,000 number for a second. By Darlin's calculation, putting away 10% in savings leaves you with $1,950 a month to live on after taxes. Get a roommate, he says, like anyone in their mid-20s doesn't have 2 or 3 roommates already. But what if you're like the 2/3 of college grads carrying an average $20,000 in student loan debt? Your payment averages $230 a month.
What if (uh-oh) you ran up the average college student's credit card balance of $2864?
Your minimum payment starts at $70 a month, and that's if you start retiring the debt right now and don't add to it at all. No mean feat.
Now you have $1,650 a month to live on. Realistically, rent in a big-city share will take at least half of that. That leaves $206.25 a week for groceries, cell-phone bill, Internet access, work clothes, and everything else. Plus, since you're putting that 10% away for retirement only, you don't have an emergency fund yet either.
Is it doable? Sure. Is it easy? Nope. Does it have anything to do with expensive coffee drinks? I don't think so.