Graduating from college is a major milestone and one that should definitely be celebrated. It is a huge accomplishment. It also means you will likely be making your first career move, beginning a full-time job in the field you just got a degree in. Starting your first real job could mean this is your first time making real, consistent money. Obviously that is great news; however, it is also likely you will be tempted to spend this money is all sorts of ways. Here are 6 money mistakes to avoid after college.
1) Making the Minimum Payment on Your Student Loan Debt
You were lucky enough to have your student loan payments deferred until you graduated, but now the time has come to start paying that debt back. You get your first statement which shows some field along the lines of “current amount due,” a.k.a. the minimum payment. Before making that first payment, consider your current financial situation. If you can afford to pay more than the minimum, you definitely should. This will put you on a path to pay off that student loan debt sooner rather than later. You will never regret paying your debt off quickly, but you may regret NOT doing so.
2) Not Creating/Sticking to a Budget
You are likely making more money than you ever have before and, therefore, you may be thinking you can afford a significant amount more than you previously could. While this may be true, you also likely have more expenses than you previously did. More income does not always mean you should be spending more. I highly recommend creating a budget as soon as you even know what your new salary will be. It is easy to add whatever fixed expenses you know, such as student loan payments, rent, car payment, etc. From there, add the maximum you would like to spend on various categories like groceries and going out to eat. You can always tweak your budget as you see fit, but creating and sticking to a budget is the foundation for good financial habits.
3) Not Saving for Retirement
You may be thinking, ‘I just started working. I’m nowhere near retirement and I’ve got plenty of time to save in the future.’ Sure, this may be true. However, the earlier you start saving for retirement, the more money you will have when you retire. Why not put your future self in a better financial position? I am a firm believer that it is NEVER too early to save for retirement, so make a habit of seeing less in your paycheck right off the bat, so you’re comfortable with that money being put away to begin with.
4) Spending Too Much on Housing
After living with your parents and/or in a dorm for the past several years, it can be extremely tempting to opt for the nicest apartment you can find. I’m not saying you should live in a roach-infested place or anything, but it’s not wise to use a large chunk of your budget on housing expenses. When you are just starting out, consider making some compromises, whether it be a longer commute, a less updated interior or a smaller apartment overall. If you start out high-end, you’ll always want something even better than that and it’s just a downward spiral from there.
5) Spending Too Much on a Vehicle
Don’t assume that because you have a new salary you deserve a brand new car to go with it. You may have been dreaming about the day you would start your first job after college and how you would finally be able to afford your dream car or a new car, but spending a crazy amount of your income on a car is kind of silly. Personally, I’m a big fan of buying certified pre-owned or used cars due to the fact that the value of a new car decreases significantly as soon as it’s driven off the lot. You don’t want to put yourself in a position where you can’t afford to have fun because you have an expensive car payment.
6) Taking on Credit Card Debt
Please, please, please do not view credit cards like free money. Yes, you can theoretically buy things with a credit card even if you don’t have the money for them at the moment you purchase them, BUT this is a very slippery slope. It is difficult to get yourself out of credit card debt because the interest rates on credit cards are so high. Plus, why pay more for something if you don’t have to? Only charge things to your credit card that you can afford to pay off when the bill comes due. This helps make sure you don’t overspend.
