STARTING OUT
FINANCIAL ADVICE FOR YOUR 20s & 30s
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As college grads make their annual assault on rental markets across the nation, many are discovering, to their dismay, that a pile of bills must be paid before the first paycheck arrives.
Laura Walstad trod this path a year ago. After graduating from the University of Kansas, she packed up her degree and worldly possessions and headed to Philadelphia to participate in Teach for America. But the ninth-grade English students at Clarence E. Pickett Middle School weren't Walstad's first challenge. Housing proved to be a major obstacle. Last July, Walstad and four roommates rented a row house near the Philadelphia Museum of Art for $2,500 a month. Splitting the rent five ways was the only way to make it affordable.
And rent was just the beginning. The landlord demanded a $50 application fee; a $2,500 security deposit; and $1,260 in rent for the remainder of July and $2,500 for August. Other charges included a $100 deposit for electricity, a $70 deposit for gas, a $25 cable start-up fee and $40 to turn on the telephone. A lot of college grads skip land-line phones altogether, but Walstad decided that she needed a line so her students' parents could contact her. Ka-ching! A $25 fee to bleed the radiators was an additional blow.
Walstad's share of the start-up expenses totaled $1,100. "I was overwhelmed by how I was going to pay for everything," she says. She borrowed money from her parents to cover 60% of the costs and used her savings for the rest. Genea Stewart, also a new teacher in Philadelphia, used a loan from Teach for America to pay the $1,000-plus she needed to move in to the house she shares with two roommates.
And, believe it or not, both women may have gotten off easy. David Morrison, president of Twentysomething Inc., a young-adult research firm, estimates the average apartment set-up cost to be more than $4,000. That figure assumes the new householder will shell out the first and last months' rent, plus a security deposit. A deposit may also be required for garage rental. And if you have a pet, you may have to pay a nonrefundable fee of several hundred dollars -- plus a monthly surcharge of $20 to $30.
Location, location. In some areas, though, grads will get a break because soft rental markets are creating move-in specials, says Fran Kastengren, of Runzheimer International, which tracks moving and relocation costs. As Susan Weston of the National Apartment Association explains, "Deposits are a total roll of the dice. They can be first and last months' rent, or as little as $29."
Don't forget the cost of furnishing a residence. Even if you rely on hand-me-downs or thrift-store treasures, be sure to sign up for rental insurance. Most companies do not offer policies with less than $20,000 in coverage, which costs about $150 a year. Sam Bennett, of Harrison Insurance in Columbia, Mo., suggests checking first with your auto insurer. If the same company writes both policies, you can often get a 10% discount on your auto insurance, which may well cover the cost of your renter's policy.
If credit-card debt or student loans make it impossible for you to come up with the cash, you can always join the 64% of recent college grads who, according to a survey by MonsterTrak.com, plan to move back home with Mom and Dad to start saving.
--Reporter: Jessica Anderson
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