Most graduates believe acing exams and graduating with honors opens the way to a smooth life of making money. Although it does give you better job opportunities and career choices, poor money management could make things quite difficult.
There are PhD-holders who make millions in their jobs but have nothing to show for it, while college-dropouts such as Bill Gates, the brains behind Microsoft Corporation, are billionaires. It all boils down to money management. Money Mistakes Many College Graduates Make Having great money management skills means breaking some bad habits that most graduates carry forward from college.
Here are a few.
1). Failure to track spending
There is no excuse for not tracking where your money goes. There are apps available that can do the job for you. Tracking your spending prevents money wastage.
2). Spending money you do not have
Another poor money habit is spending money that you are yet to receive. The money could fail or delay to come in, leaving you in debt.
3). Impulse buying and Emotional spending
You have probably had those moments when you went to the mall to buy a single item only to end up spending way more than planned. Sometimes, feelings are to blame for impulse buying.
4). The Need to Fit in
If you feel the need to spend more than you can afford on the latest trends, eating at expensive restaurants, and living in posh neighborhoods just to fit in with friends, then you are better off changing them. If not, you will dig yourself in debt.
Here are five habits you can develop to keep your finances in check after college.
1). Evaluate Job Offers Keenly
It’s normal to be excited about your first job and the prospect of earning, but when faced with multiple offers, the salary should not be the sole basis of your decision.
There are a few things you should consider.
Benefits – Other than the basic salary, what benefits does your potential employer offer in terms of medical and retirement savings benefits and bonuses? A job that appears to have a low pay may turn out to be high-paying if you factor in the benefits.
Cost of living – Where is the job located and how is the cost of living? Some jobs will offer high compensation to cover the high cost of living in the location. And in some cases, you may have nothing left to save or invest.
Potential for growth – Inflation increases every year and your income should grow as well. Does the position offer an opportunity for growth or will you be stuck in the same position for years? If in future you left the position, will the experience you acquired make getting a new job easy?
2). You Need to Understand Your Financial Situation
Gauge your financial state. What is your income, and what liabilities do you carry? What monthly expenses do you incur and are you able to comfortably meet them?
Start paying the minimum monthly payment of your loans especially the student debt right away. If your salary is not sufficient, get a side hustle. Reduce your expenses by living frugally. For instance, make meals at home, move to a cheap neighborhood, buy second-hand clothes or live with your parents until you can comfortably afford to pay rent.
Do not try to keep up with the Joneses or prove to your peers that you can afford the high life. At the end of the day, the one who will be drowning in credit card debt is you.
Speaking of credit cards, you need one if you don’t already. A credit card, when used responsibly, can help build your credit history and give you a good score which makes getting a loan in future easy. Paying your bills on time further improves your credit.
3). Learn to Budget
If you desire the financial freedom that comes with proper financial management, learn the skill of budgeting. When you make a budget every month and stick to it, you are unlikely to make extravagant and unnecessary purchases.
First, make a list of all sure incomes such as your salary. Next, make a list of all your recurrent monthly expenses which you can easily get from old receipts or credit card and bank statements. Separate your needs such as rent, food, minimum loan repayments taken high-rates lender though consolidate at one place might also help, you just need to find a right reasonable lender with nation21loans.com, and utilities, from wants such as designer clothes – which are things you can do without.
Match these expenses against your income, with the needs coming first. Budgeting does not mean you can’t enjoy the good things in life, set aside some money for entertainment and vacations, but only if you can afford it without accumulating credit card debt.
Check your expenses from time to time, preferably every weekend and correct any deviation from the budget.
4). Avoid Blindly Following Crowds
Now that you are out of college, lose the herd mentality. Before making any move, especially financially, reason out and be keen on the details.
For instance, just because your peers are praising and going for a student loan consolidation doesn’t mean you should rush into making the same move. Consolidating your student loan is not an entirely bad idea, but you have to analyze the situation to ensure:
- You do not lose any benefits your student loan servicer may be offering.
- You do not end up paying more interest.
- You do not lose the benefits that come with using income-based repayment plans such as low repayments and debt forgiveness.
Before signing any financial documents such as insurance, read it through. Understand the fees involved (especially penalties) and make sure the benefits are worth it. Research on any better options out there to make sure you are getting the best deal.
Make financial decisions that you are sure will benefit you and not just because of a sales person’s hype or because friends are doing it.
5). Plan for Your Future
It’s never too early to secure your future. Time runs fast and you need to plan for your life early. If you don’t, one day you will look back with regret at all the time, money, and opportunities wasted.
Build an emergency fund which equals or exceeds six months’ worth of your monthly expenses. Have a specified amount deducted directly from your salary and deposited into this account.
Create short term and long term SMART goals. Create a plan to achieve them, but tackle one at a time. Invest in securities such as stocks, bonds, and mutual funds to grow your money.
A 401(k) plan, for instance, is an excellent retirement plan. The earlier you start contributing towards it the better. The money is invested in securities and earns compounding interest. It gets better if your company follows the employer-matching policy where an employer matches the employee’s contribution up to a certain percentage.
Success in life after college depends on how smart you are in this tough and ruthless world. There is one rule you should always follow: make more money than you are spending.
Ensure the job you pick offers the best compensation for your skills and has an opportunity for growth. Create the habit of budgeting and living within your means. Make decisions that positively contribute to your future and that are in your best interests.
By following these simple tips, you are sure to have better control of your finances and enjoy life better.