Graduating from college and starting your life in the “real world” can be a scary venture – your friends aren’t living across the hall from you anymore and you’re probably starting your first professional job. On top of that you’ve likely got some college loans looming on the horizon, your parents may be less willing to help out financially and it’s entirely up to you to determine how you want to spend your paycheck.
While this period in your life is exhilarating and full of new experiences, it’s important you take some time to manage your finances. If you don’t, you may end up making one of these common post-graduation money mistakes.
Living beyond your means
Don’t assume now that you’ve got a degree and a steady job you’ll start living the same lifestyle as your parents. Remember – it took your parents a long time to build up their earnings and afford the things they do today. Take a look at your income and then base all of your expenditures, including rent and car payments, off of that number. The bottom line is: you can’t spend more than you earn!
Falling into the “more, more, more” trap
Just because you’ve got a brand new apartment and a steady paycheck doesn’t mean you need to fill it with a new couch, a flat-screen TV and a new wardrobe. Spending too much too quickly can impact your finances for a long time. Instead, spread out your big purchases over a long time. Your savings account will thank you!
Living without a financial safety net
While it’s good to have a positive outlook on life, sometimes it’s important to plan for the worst. And that’s especially true when it comes to managing your money. As soon as you’re able, start putting aside money every month towards an emergency fund. Try to have at least six month’s worth of monthly expenses. This will ensure you won’t have to max out your credit cards even if you lose your job, get hospitalized or were evicted from your home.
Waiting to invest
In the back of your mind you know it’s important to save for the future, yet it probably seems counterintuitive to start saving for retirement at the beginning of your career. However, the longer you wait to start saving, the more you are missing out on the power of compound interest. Start paying into a retirement account as soon as possible – otherwise you may be missing out on a lot of savings in the future!
Falling into bad habits
It may not seem like the $5 lattes or $30 happy hours are a lot. However, when you start adding them up, you’ll quickly realize that these smaller expenditures are making a dent in your savings. Don’t make it a habit to eat out every day, or buy a coffee on your way to work. Take a good, hard look at your spending on a regular basis and cut out or reduce items that are purely discretionary.
Try to stay on the right financial path when you’re just starting out. It will save you the trouble of cleaning up your finances when you are older!