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Friday, April 25, 2014

47. Five Money Mistakes College Grads Make

Graduation is quickly approaching. Time to make decisions. Here's some things to consider if you are a college graduate or a parent of a college graduate. These are some money mistakes college grads tend to make… Avoid them! 

1. Not Budgeting. Include all monthly income and spend it all on paper or your spreadsheet. Make sure to include categories for saving and investing. Tweak this every few months and track your expenses with

2. Forgetting to Save. Saving for retirement and emergencies is important. If your company offers a 401k match invest the minimum to get the match. That’s free money! If no 401k is offered consider investing in an IRA or Roth IRA. Not having an Emergency Fund is a serious recipe for disaster. Emergencies can and will happen: the car will break down, an appliance will have to be repaired, etc. The credit card with 30% interest should be the last option not the first.

3. Living Beyond One’s Means. It is important to spend less than you make. Remember that it took your parents years to acquire, save, and build their lives together. Don’t expect to have everything that has taken them 20, 25, 30 or more years of marriage in the first few years of your post-college life. Delayed gratification is important. Consider too getting your graduate education knocked out before you are married or have children. This will theoretically increase your income potential. Remember there’s two ways to change your financial situation: increase your income or decrease your expenses. 

PLEASE NOTE: Don’t buy a new vehicle as soon as you graduate with a huge monthly payment. Your income is one of your greatest assets and paying that monthly payment with interest is a killer. Not to mention why add the stress of a car payment while having the responsibility of paying bills (rent, utilities, etc.), potential student loans, and potential consumer debt (credit cards) off at the same time. Consider driving your “old” college vehicle for a few years before you upgrade. 

4. Unrealistic Expectations for Entry Level Positions. Often educational institutions will exaggerate the opportunities available to seniors and graduates. Check out this link on May 2013 National Occupational Employment and Wage Estimates and the “Annual Mean Wage” column or click on a specific occupation title for more details. Another good resource is for looking up jobs by company and title. Also check out to look average salaries by job title.

5. Not Paying Off Debt ASAP. Consider paying off your debt as soon as you are able and living frugally particularly for the first few years after graduation. Remember as a college student $20 or $50 was a lot of money. Keep your same, hopefully, frugal spending habits you had as a college student with your first few jobs. Have some fun and celebrate as you become completely debt free!

What do you think? Hope this helps!