For those of you who will be graduating from college soon or who have recently graduated from college, there are a few personal finance tips that will help you avoid making mistakes that many new college graduates make. Unfortunately, families often will not discuss personal finance topics so you have to learn for yourself. This way can lead to trial and error. To avoid costly mistakes, consider the following:
- Don’t base your budget on future earnings: While it may seem exciting to dream about the things you can do and buy when you settle into your career, the reality is that sometimes it takes a while to work up to the position you are wanting with the salary you desire. Even with a degree, you will need experience to advance in the career. When I graduated with my bachelor’s degree, I still had to start at the entry level. With experience came career advancement, but it certainly didn’t happen overnight. Your budget should be based on your current salary. Don’t get in over your head in debt that will take you years to pay off.
- If you can’t afford to pay cash for something, don’t use your credit card: We tend to use credit cards as crutches when we can’t pay cash. Crutches are designed to hold you steady, but why would you use crutches if you didn’t need to? In other words, avoid the debt of credit cards and you won’t be dependent on the crutches. Living on credit cards is a slippery slope. Save up and pay cash. It may take a while longer, but you won’t have to incur interest expenses and payments.
- Don’t automatically up your lifestyle when you get a better job: Too many times, people will automatically spend more once they make more. Why not maintain your same lifestyle and save more or get out of debt? If you could survive on the old salary you should certainly be able to live the same lifestyle with the new salary and build wealth.
- Don’t wait to start contributing to a retirement account: Start contributing to a retirement account as soon as possible. Once you are eligible to begin making contributions, start making them even if you can only contribute a small amount. Time is on your side. Don’t be like many individuals and wait until you are in your forties or fifties to begin your retirement savings.
- Don’t wait to build your savings: Automate your savings by having a specific amount transferred from your checking account to a savings account every week or every pay period. It will be easier than manually making savings contributions. The compounding effect will help your savings grow exponentially over time.
Take it from someone who wishes she could go back and change past financial decisions. Begin making wise financial decisions today!