Graduating college is an accomplishment that both the individual receiving the degree(s) as well as their family look forward to with great pride. Although, with this great accomplishment of course comes great responsibility(s). Some of those include, finding a job, buying a house, and helping support a family. What’s plays a significant role (some or another) in all three of these?
Your finances!
Now there’s no question that maintaining all these new responsibilities can be a learning process. You’re perhaps more than likely to make a mistake somewhere at some point.
However, making mistakes is certainly not something you want to make a habit of. Especially when comes to your finances.
A recent article on Yahoo Finance (a resource I’ve come to enjoy) discusses 5 of the biggest money mistakes recent graduates are prone to making.
The first of these is not making a budget. In my opinion, if you don’t even attempt to make a budget, you 100 percent fully deserve to have your finances go up in flames. The reason I say this because if you were smart enough to graduate college, you SHOULD be smart enough to realize making a budget is an essential component to keeping your finances in check. So safe to say I’m a bit surprised this even made the list, but I think I’ll live.
Now what may be difficult for some is figuring out how to split up your budget. The article notes that experts recommend the 50-20-30 rule. This is a rule involves putting 50 percent aside for “essentials” such as bills, groceries, and transportation. 20 percent in your savings for future endeavors such as buying a home, raising children, investing among many other things. Finally, 30 percent for personal use such as shopping, traveling, or whatever the heck you wanna spend your money on, hell I won’t judge!
On to the second mistake, living beyond your own means. What this means is that you’re spending more than you're making. Now if you have this problem, my only question is; how stupid can you be? Spending more than you make?
Some ways you can avoid this (besides common sense) as was mentioned before, making a budget! Another way, as the article suggest is using an app known as Mint which tracks every cent you spend and helps you see exactly where your money is going.
Keeping the ball rolling here, the third mistake on the list is not taking financial risk. This is an interesting one, you read that at first and perhaps think; “Taking financial RISK!? Why in tarnation would I want to do that?” What’s meant by this is not taking risk than can result in reward, such as investing.
When it comes to this subject, an advantage recent college grads have is time. An app the article suggest to help you get started in this area is Acorns. For this app you link your credit and/or debit card(s) and with every purchase you make Acorns will round it up to the nearest dollar and invest the remaining change. Do however take the time to educate yourself first, blindly investing your money is like sticking your arm in lion’s cage at the zoo; maybe it won’t end badly, but it probably will. The article suggest taking these four steps before you get started.
The fourth mistake, not saving for retirement. What, do you think retirement will never come? Well, not saving for it is a terrific way to ensure that it won’t. As with taking a financial risk, time is also an advantage when comes to saving for retirement. If you happen to have a job that offers a 401k plan with an employer match, the article highly suggest to sign up and maximize your contributions (aka make as much money possible). If you’re not fortunate enough to have this opportunity, you can start your retirement account with a roth IRA or tax free savings account with an annual contribution cap of $5,500 contribution cap.
Think about this, if you start now, in 40 years you could have over 1 million dollars saved up by time you retire. Basically, the early you start, the more money you’ll end up with. What a concept!
Last but not least, not thinking ahead. This is pretty much the theme of this list as a whole. In life, you never know what will happen and how much money you might need. The article then suggest setting aside money in an emergency fund with about 3 to 6 months worth of expenses, sound familiar (I had previously written an article on emergency savings before...not to brag)
All in all, you’re not gonna be able to run away from growing up and avoid your finances being a huge part of it. I mean you could, it just won’t be pretty.
Of course as I also said earlier, we’ll make mistakes growing up, but referring to link posted throughout this article you can put yourself in a great to avoid any financial related. I don’t know from experience (still just a 20 year old hot shot...again, not to brag), but you can trust me, down the road you’ll be glad you avoided these mistakes. I mean I can’t really imagine someone looking back and being upset that didn’t make a major financial mistake, but then again I have underestimated the human race’s for stupidity before and have wound up being dead wrong.
