5 Money Mistakes New Graduates Make

eHow Money Blog


For today’s college graduates, the transition from college student to full-time employee can be a challenge, especially given stagnant wages and rising costs of living in many places. Still, even on an entry-level salary, young adults who establish good financial habits now can prepare for unforeseen expenses and save for future goals.

Here’s a look at five common money mistakes 20-somethings make — and how to avoid them.

Failing to negotiate your first salary. In this competitive job market, you may be so thrilled to have an offer that you scarcely think twice about the salary. But your first salary will set the bar for your earning potential throughout your career, so negotiating a slightly higher starting salary can pay huge dividends down the road. “It is beneficial to negotiate because that will all have long-term effects on how much you’ll be earning over the course of a lifetime,” says Michelle Dosher, managing editor for consumer publications at the Credit Union National Association. “It is OK to negotiate.” Do your research on what someone in your role with your level of experience can expect to earn in that market.

Living beyond your means. For recent grads earning their first full-time salary, temptations abound. With friends splurging on stylish new furniture or nights out at the bar, it’s easy to get carried away. This so-called lifestyle inflation occurs when your standard of living suddenly balloons, and it can be difficult to cut back later once you get used to fancy digs and lavish meals. “Young adults want a certain lifestyle and they want it now,” Dosher says. “Treating yourself to a few things is fine, but trying to stay mindful of what you’re spending is best.” Broke college students know how to score cheap grub and host parties at home, and there’s no shame in continuing these habits for a few years as you find your financial footing.

Relying on credit. As you’re establishing yourself in a new job and a new apartment, you may need to charge a few work-appropriate suits or other essentials. However, if you get into the habit of charging things you don’t truly need (pizza delivery, tech toys, designer bags), you could quickly find yourself drowning in debt. “I urge young adults to be very careful while they’re using credit and not charge more than they can afford to pay off monthly,” Dosher says.

Avoiding credit. This may come as a surprise after the previous point, but avoiding credit cards entirely can backfire. “It’s really important to establish credit in your own name,” Dosher says. “A strong credit history will pay off in the future for young adults when they want to buy a house or buy a car.” If you can’t get approved for a traditional credit card, look into a secured credit card (where you put down a deposit and that serves as your credit limit until you graduate to an unsecured card) or a credit-builder loan (which is designed to help you build a positive credit history).

Skipping retirement savings. “Many young adults don’t see the benefit of saving for retirement because they’re very young and they’re paying other bills,” Dosher says. “I would stress the importance of saving for retirement while you’re young, because of compounding interest.” If your employer offers a 401(k) match, take advantage of that because it’s essentially free money.

Photo credit: Getty Creative

Promoted By Zergnet


Is DIY in your DNA? Become part of our maker community.
Submit Your Work!