Graduating college is an accomplishment that both the individual receiving the degree and their families look forward to with great pride. Although, with this great accomplishment, of course, comes great responsibilities. Some of those include finding a job, buying a house and helping support a family. What plays a significant role some way or another in all three of these?
Your finances!
There is no question that maintaining all these new responsibilities can be a learning process. You are perhaps more than likely to make a mistake somewhere at some point.
However, making mistakes is certainly not something you want to make a habit of, especially when comes to your finances.
A recent article on Yahoo Finance, discusses five of the biggest money mistakes recent graduates are prone to making.
The first of these is not making a budget. In my opinion, if you do not even attempt to make a budget, you fully deserve to have your finances go up in flames. The reason I say this is because if you were smart enough to graduate college, you should be smart enough to realize making a budget is essential.
Now, what may be difficult for some is figuring out how to split up your budget. The article notes that experts recommend the 50-20-30 rule. This rule involves putting 50 percent aside for “essentials” such as bills, groceries and transportation, 20 percent in your savings for future endeavors such as buying a home, raising children and investing and finally, 30 percent for personal use such as shopping, traveling, or whatever the heck you want to spend your money on.
On to the second mistake, living beyond one’s means. What this means is that you are spending more than you are making.
Keeping the ball rolling here, the third mistake on the list is not taking financial risk. This is an interesting one. You read that at first and perhaps think, “Taking financial risk? Why in the world would I want to do that?” That is right, taking financial risk like investing is just as important as savings.
The fourth mistake is not saving for retirement. What, do you think retirement will never come? Well, not saving for it is a terrific way to ensure that it will not. As with taking a financial risk, time is also an advantage when comes to saving for retirement. If you happen to have a job that offers a 401k plan with an employer match, sign up and maximize your contributions. If you are not fortunate enough to have this opportunity, you can start your retirement account with a roth IRA or tax-free savings account with an annual contribution cap of $5,500.
Think about this. If you start now, in 40 years, you could have more than $1 million dollars saved up by time you retire.
Last but not least is not thinking ahead. This is pretty much the theme of this list. You never know what will happen and how much money you might need. Set aside money in an emergency fund with about three to six months worth of expenses.
Of course, as I also said earlier, we will make mistakes growing up, but you can put yourself in a great position to avoid any financial related pains. Down the road, you will be glad you avoided these mistakes.
Graphic: Cole Parzych | The Oswegonian
