10 Common Money Mistakes of New College Graduates
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This is a guest post from Mr Credit Card from www.askmrcreditcard.com. Mr Credit Card was a student a “long” while ago, but today, he is going to be writing about some mistakes to avoid when you graduate and enter the working world. If you are looking for a credit card, please check out his best credit card deals and offers section.
So you’ve finished your work, you’ve passed your classes and earned a degree that’ll make you rich, right? For a lot of students who’ve recently graduated, this might be the time to really start the party, because after all, you deserve it. Here are some very common money mistakes that recent grads make that usually just end up putting them in an even larger financial burden than they already had.
1. Overspending on the wardrobe. The first thing that many folks who graduate do is to go on a shopping binge on a new wardrobe. After all, you’ve just finished living in pajama pants and hoodies for 4 years, now it’s time to step it up and dress like an adult. Being well dressed and wearing nice clothes does not mean spending all of your money on designer fashion. Shop the sales and clearance and look for deals and great buys instead. If you really do need some fancy clothes for your work, save up for it.
2. Partying and drinking more while out of school. Maybe you only partied a little during school, or maybe not at all and now that you’ve graduated you feel like you should. Just because you’re done with school, it doesn’t mean you’re suddenly able or should be partying and drinking with friends a year afterwards. Also playing Mr. Big and picking up the tab doesn’t always reflect your success to your friends and family, but that you’re wasting money. Look for other ways to celebrate that may be cheaper and save the money for something that won’t give you a hangover the next day. This is almost like the Starbucks effect, but I guess we’ll just call it the Happy Hour effect.
3. Eating out too much. A lot of students are sacrificing great meals during school by eating Ramen noodles and frozen pizza until they graduate, so of course when it’s all said and done they can’t wait to indulge a little in something that doesn’t go in the microwave or come with its own packets of seasonings. Unfortunately, eating out is a bad habit that can end up becoming extremely expensive. The best thing would be to improve your cooking skills from Ramen Noodles to something more conventional!
4. Buying swanky gadgets. Everyone loves gadgets and college graduates are no different. Once you make it to graduation though, this is no time to splurge on brand new cell phones and laptops, nor new plasma TVs and home entertainment systems. Believe it or not, the gadgets that brought you through your 2, 4 or 8 years of education, are still good enough until you can actually afford the newest and swankiest of gadgets. And, if you didn’t have it before, you probably don’t need it now.
5. Abusing the credit cards. This is an easy one to fall into, and not just by college graduates. Upon graduation, the world is yours and all you can think of is jumping on the high paying job that you were trained for and letting the cash roll in. If it takes a little while that’s okay, because you have credit cards and you can pay them later, right? Unfortunately, the high paying job doesn’t always land at your feet as soon as you take your gown off and you certainly don’t want your entire salary going to paying credit cards – something that the recent CARD act hopes to assure.
Don’t abuse your credit cards with the intention of worrying about it later. Never be tempted to carry a balance on your credit card. Do not fall for low interest rate offers. Instead, pay your bills in full every month. Use either a cashback rewards credit card or a gas credit card if you drive and travel a lot and save some money in the process. Once again, remember to pay your bills in full.
6. Not being savvy when grocery shopping. This is similar to eating out a lot. College graduates are probably the last to use grocery store coupons or shop the cheapest prices on bologna especially when they’ve most likely been choking down Ramen for a while. It is still a good habit to get into right away to prevent spending unnecessary gobs of money on groceries. If you have the time, learn to use coupons. There are lots of Mommy sites that will teach you a thing or two on the subject.
7. Celebrating with an expensive trip. Woohoo you’re free from school forever, now you should take a 2 month backpacking vacation across Europe, right? Actually, this is probably not a great idea since a) vacations cost money you probably don’t really have in your pocket yet and b) it’s best to start looking for a career in your field as soon as possible. Rather than enjoy the good life, learn the right to enjoy it. You simply have not earned that right just by graduating. Remember, money talks in this world.
8. Purchasing a new set of wheels. As a college student, you may have spent the majority of your time while getting educated, either carpooling with friends, driving a clunker that has since been silly stringed and covered with class of 2010 graffiti or just plain old walking. Many graduates feel very strongly about purchasing a brand spanking new vehicle upon graduation and end up with a car payment as much as most home mortgages. Take the silly string of your clunker and get as many miles out of it as you can. Get a used car if you really have to.
9. Renting a new crib by yourself. Who’s sick of dorm rooms and roommates? A college grad is sick of it, that’s who, but living by yourself and renting a fancy new apartment is actually a waste of money. At the very least, keep one of your buddies around to share the rent so you can save some money for the house that will be an even better investment in the long run.
10. Forgetting to save for retirement. When you are young and feel like you can conquer the world, the last thing you will bother about is retirement savings. After all, it seems so far away. But always sign up for your company’s 401k plan or whatever retirement plans they offer (especially if they match). If your company does not have a retirement plan, you can set up your own Roth IRA and start investing with less than $1000.
Look Further Down the Road
Sure you deserve to treat yourself, but decide upon a treat that is minimal and won’t put you in debt in the long run. After all, you don’t want to spend the rest of your life in your new career paying off everything you splurged on as soon as you graduate. Make wise decisions now and you’ll reap the rewards later.
Simon’s Note: As a somewhat-recent graduate myself, I’ve made a few of these mistakes as well with a few upgrades in the closet, an iPhone, and a PS3 since graduation. But, it is important to note that many young adults make these mistakes WHILE IN COLLEGE too – which is even worse.
(Photo credit: CarbonNYC)
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