I remember feeling so excited when I graduated from college with my bachelor’s degree in May 2012. I was excited to be entering the workforce. I was excited to be a “real adult”. And I was excited to be earning the big bucks, or so I thought.
Looking back, I made some of the same classic money mistakes that many new college grads make when they leave college and youth behind. The worst part is that these mistakes set me back from reaching my financial goals by at least a couple of years.
Here are 4 of the biggest and most common money mistakes new college graduates make, and what you can do to fix it if you’ve already made one or more of them.
Underestimating Student Loan Payments
Most college students graduate with at least some student loan debt. If you were lucky enough to graduate without debt, you can skip to the next section. But for the rest of you, read on.
Student loans are a great tool to help you get your education when they are used appropriately. But sometimes they are abused. Many students use loans to pay for way more of their living (and partying) expenses than what they should, and they end up with huge student loan payments to make after graduation.
When you graduate from college, you should try to find out how much your student loan payments will be before you acquire any other monthly financial obligations, like rent or a car payments.
Rapidly Inflating Your Lifestyle
When you get your first job after college, it can be super tempting to buy new things, move to a nicer area, or get a T.V. subscription since you are now making the “big bucks”. But the truth is that most starting salaries are not high enough to pay for many of these lifestyle inflations.
While it’s probably a good idea to invest in a few new pieces of clothing so you are dressed appropriately for your new job, you should try to avoid inflating your lifestyle much beyond that.
Delaying Retirement Contributions and Savings
If you fell victim to the lifestyle inflations we already discussed, the next mistake you probably made was to delay saving for retirement or building your emergency fund. When you are spending all of your money on happy hours after work, lunch out every day, and your satellite T.V. subscription, it’s unlikely that you’ll be able to contribute much, if anything, to retirement. This is probably the worst mistake a new graduate can make. The younger you are when you start saving for retirement, the better. After all, the more time you have on your side, the more compounding interest you’ll build up. You have heard of compounding interest, right?! Don’t make this money mistake. Start saving right away!
Not Negotiating Your Salary
As a graduating senior, I went on a lot of job interviews. I interviewed with over a dozen different companies for a dozen different jobs and they all had different starting salaries. At the time, I had no idea what the industry standards were or how much my time was really worth. I also mistakenly thought that the starting salaries were heavily dependent on the area where the company was located and the cost of living there. Now that I’ve been out a few years, I know that’s not always the case. Sometimes employers just want to get away with paying as little as possible for as much talent as possible.
Before you interview for jobs or accept an offer, you should research what other new grads in your industry are making and then make your case for why you deserve a higher salary. The worst thing that can happen is that they say no.
Did you make any of these mistakes when you were a new college grad? What did you do about it?