Avoid the 20-20-20 Club

The first paycheck you receive as a recent and newly employed college grad will feel like a bazillion dollars.  Let’s face it, the $7-10 an hour you were making slinging pizzas, pouring coffee, scanning documents or filing taxes will seem like chump change compared to the massive lottery winner-type earnings you’ll be pulling down when you’re gainfully employed full-time.  Even $2,000 – 3,000 a month take-home is a considerable amount when you’re used to selling plasma for a night on the town.

What you must fight to control is your urge to join the 20-20-20 Club.

I thought it was merely a myth.  A story, perhaps, that was made up 4 decades ago by someone trying to scare the bejeezus out of college grads.  However, it is completely real and something to be avoided like H1N1.

Joining this illustrious club gives you certain privileges like being able to complain about your student loans for the next 15-20 years, having nightmares about the size of your credit card bill, realizing that taking a vacation in the next 5 years is out, and the list goes on…

The nice part about being in this club is you’re impeccably dressed all the time, your friends think you are uber-successful, you will no doubt attract the opposite sex, and you’ll be driving a really nice car.

Here’s the downside – you’re BROKE.  And because you’re broke, you are carrying WAY more stress than you should so you just go spend more money thinking that will make you feel better.  Other side effects include weight gain, hair loss and chronic lying.

The 20-20-20 Club is for people who lived like rich college kids on borrowed money.  They then continue that rich lifestyle on credit cards and car loans and soon find themselves in over their heads with debt.  20-20-20 stands for 20-some years old, bringing home 20-some thousand dollars a year, and driving a 20-some thousand dollar car.  It’s a first class ticket to Broke-Ville.

The reason you must fight the urge to join the club is your dream car is the first big ticket item you’ll want after that monstrous (seeming) paycheck.  After the car comes new furniture, new electronics, a new wardrobe, new golf clubs and night clubs.  And before you know it, you are not only a card-carrying member of the 20-20-20 Club, you are it’s Senior Officer.

So what’s a newly employed grad to do?  Simple–Start with a very thorough look at your own finances.  What do you owe for student loans?  Credit card debt?  What will be your apartment rent?  Utilities?  How much will you spend on groceries and eating out?  How much will you contribute to your 401k and ROTH IRA?  (Remember time is on your side, so the more you put in now, the greater it compounds later.)  In essence, work backwards from the way you’d like to live and see if you can actually afford to live that way before diving head long into the deep end of debt.

And trust me, that car that you’ve always dreamed of having… it will still be there when you have the funds to buy it.  And when you have the funds to buy it, you’ll bypass the 20-20-20 Club and join the Club of the Young, Smart and Successful.

Adam Carroll is the founder of National Financial Educators, a financial literacy seminar company based in West Des Moines, Iowa.? He is the author of Winning The Money Game, A Rule Book To Achieving Financial Success for Young People, and the newly released program Scholarship Mastery.? Adam and his team of facilitators have delivered his program The Money Game to over 150,000 college students across the country.? Adam’s mission is to aid in the development of a financially literate generation of Americans.

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