Mistakes are unavoidable, but you should be especially careful when it comes to your finances.
As you prepare to graduate college, you also prepare for the “real world.” You’ve spent the last four years obtaining as much knowledge as possible in your field, making memories, applying for jobs, and writing and rewriting your resume. Graduates beware, though; student loans are the second highest form of personal debt, according to this New York Daily News article. And with college debts increasing, it will be more important than ever to have a smart financial strategy in place and avoid as many mistakes as possible.
By taking a step ahead of your peers in choosing wise investments, you can create healthy habits for your personal finances for years to come and avoid future debt issues.
Financial mistakes can be easy to make, but there are ways you can avoid them.
- Having no credit. Everyone talks about saving money, and we are no different. Unfortunately, all this talk about savings has college graduates a little hesitant on taking out loans or credit cards in fear of creating an overwhelming debt. Plus, not to mention, college already creates those financial obligations, and it is increasingly harder for those under 21 to sign up for a credit card with no existing income. So, what’s a newbie to do? Build your credit history slowly and regularly by opening accounts and your own credit cards as you are able and paying them off by or before the due dates as well as routinely.
- Why this is important: When you want to make big, future purchases, like a house, you will have a hard time being approved for a loan without a co-signer or at all. When I was still in college, I bought my first car with cash from money I had saved from my summer job. Not long after graduating, I needed to purchase a new vehicle, which proved to be a challenge due to my lack of credit. Over the years, I have been able to develop a favorable credit score through paying off a credit card, paying off that new (used) vehicle I finally was able to obtain and maintaining my bills.
- Not having a plan. Having a limited or non-existent financial plan is one of the biggest mistakes recent college grads make. As a college student studying and working tirelessly toward that degree, you are lucky if you have two pennies to rub together as you battle the choice of groceries or rent. When you say “yes” to that first job out of school, though, it can be easy to fall into poor spending patterns very quickly. To avoid this, cut back on going out to eat by spending more time enhancing your cooking skills and spreading out your personal purchases instead of buying everything for your new apartment at once. Additionally, focus on always paying bills first at the beginning of every month so you know how much is available in the bank the remaining weeks.
- Why this is important: Money adds up quickly, and developing these positive habits ahead of time can save you not only hundreds but possibly thousands per year.
- Waiting to save and worrying about finances later. Consider consulting with or finding a financial mentor to help you along this new journey. Waiting to save or even failing to worry about beginning to pay off your student loan debt can cause inconveniences and hindrances in your future. Knowing where to invest savings is also tricky, but a certified financial specialist can help you. You could try to contact old friends from college with a finance degree who may be willing to provide some advice at no charge as they begin their careers.
- Why this is important: The sooner you start working toward chipping away those student loan bills, the better your overall financial situation. If you were to plug your debt numbers into this student loan calculator tool, you may be appalled at the time frame it will take you to pay it all off (with interest) with a low monthly payment. Plus, creating a savings account will help to keep you out of potential sticky situations with money. And if you start investing now, you could be sitting pretty with a nice retirement fund.
By thinking about your future now, you can avoid these common financial mistakes recent college grads make, while building yourself a nice, comfortable financial safety net.