The Magic Formula for Financial Success Post Graduation

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College graduates around the country are currently coming down from the post-graduation highs and either waking up to screeching alarms way earlier than they ever had class or the sinking realization that getting a J-O-B is crucial to adult-life survival.

First paychecks might get blown on rounds at the bar in celebration of being a successful adult, after all student loan payments don't kick in for another few months. The lucky ones getting a signing bonus could be tempted to splurge for an upgraded set of wheels or an above budget apartment. There are just so many mistakes a 22-year-old with limited financial experience is likely to make.

But in this time of celebration and uncertainty, one rule should reign supreme when making money decisions: the less than 50 percent rule.

Keeping Fixed Expenses in Check

Life after college is immediately followed by decisions about where to live, how much to pay for an apartment, how to handle student loan debt, figuring out transportation costs and budgeting for everyday spend. It can be enough to send business majors into a bit of a tailspin.

The goal should be to keep fixed expenses like student loans, rent and cost of transportation at less than 50 percent of your monthly take home pay.

Keeping to this ratio may be difficult in major cities, but millennials striking out alone for the first time should recognize living in a pricey city is often a privilege. Moving to New York or San Francisco to pursue your dreams is admirable, but it shouldn't continue to sink you into debt. Don't finance your dreams on credit cards or personal loans. Your future self will thank you.

The Calculation

Wondering if you can meet the 50 percent rule? Well, the typical millennial needs to first calculate monthly payments on student loans.

The grace period may still exist for another five months, but it's important to know how much your lenders will be demanding from each paycheck.

You can use to get an estimate on your federal student loan payments and look into income-based repayment plans and forgiveness programs to help soften the blow.

Once you have your student loan payments figured out, subtract that number from your monthly take home pay to see how much is left each month for your remaining fixed expenses.

The cost of your apartment and transportation is in your control, but your student loan debt is more-or-less set in stone. If your loans will be eating up a significant chunk of each paycheck, you're restricted on apartments you can afford and need to minimize the cost of transportation.

Millennials who managed to evade the bear trap of student loan debt should moderate the 50 percent rule to 30 or 40 percent and be sure to get serious about saving for retirement and short-term goals early on. Don't think of avoiding student loan debt as a reason to be makin' it rain in your early 20s just because you don't have major debt.

Avoid the Regrets of Your Peers

Young graduates, don't be fooled into thinking that handling personal finances is something you can focus on when you "grow up." Your slightly older peers would caution you to take heed of the warning to get in control of your money now.

A recent survey by of millennials who graduated in the last four years yielded four big regrets from the mid-20-somethings.
  1. Not saving enough: 31%
  2. Not learning personal finance in school: 26%
  3. Not being more careful about loans and debt: 23%
  4. Not establishing credit sooner: 19%
These regrets are easy to avoid if you take the proper steps now.

Fortunately, you have the advantage of foresight to keep from making the same mistakes people who graduated no more than four years ago made. By starting good financial practices now and spending no more than 50 percent of your income in fixed expenses, you'll be able to set yourself up for wealth in the future.

Erin Lowry writes for DailyFinance on issues relating to millennials, money and personal finance. She is the blogger behind Broke Millennial, where her sarcastic sense of humor entertains and educates her peers. She is also the content director for MagnifyMoney.
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