It’s almost inevitable that you will make a few financial mistakes after you graduate from college. Nearly everyone does, and you can learn from them and move on without doing any serious long-term harm to your finances. However, it doesn’t hurt to know what some of the most common pitfalls are so that you can avoid them.
Not Contributing to Your Retirement Account
You’ve just started your first real job, fresh out of college. You’ve been given the paperwork about your retirement account, but retirement seems so far away it might as well be something that will never happen. You could sure use that money for other things, such as furnishing your new apartment or just having fun. Does this sound familiar? While it’s true that you have plenty of time to make up for what you don’t put away for retirement now, you’ll never have another chance for such a small amount of money to appreciate so much in value. The next ten years are a great time to save aggressively, and the value of what you say will increase exponentially. You might even have the option to retire early if you’re smart with your money.
Not Refinancing Your Student Loans
Take a close look at the payment plan for your student loans. How much are you paying each month? What if you could lower your payments? If you refinance student loans, you could potentially cut down on your monthly expenses and pay less in total on the loan. You can find out more about your options and eligibility online.
Not Controlling Your Spending
If you were living off student loans or otherwise on a tight budget as a student, you might be tempted to go a little crazy once you graduate and start getting your first real salary. It’s not that you don’t deserve a celebration, and if you want to splurge a little in the first couple of pay cycles, that’s fine. But carry on and you may fall into some bad spending habits and start living beyond your means, which can have serious implications for your long-term financial health.
Not Having a Budget
In fact, not only should you make an effort to reign in your spending, you need a budget. Before you throw your hands up in frustration, keep in mind that a budget does not have to be punitive. It is simply a tool that you can use to understand where your money is going and where you can save. You can use an app to help you figure out what you’re spending and to put a budget together based on your goals and needs.
Not Having Emergency Savings
One of your first priorities should be to build an emergency savings fund if you don’t already have one. This is for unexpected expenses that arise, such as medical costs or vet bills or even unemployment. You should initially aim for enough to cover a month of expenses and build from there to three to six months or more of expenses.