Jeanne is a married mother of two who works full-time as a freelancer and virtual assistant. She also occasionally helps out on the farm she and her husband own. With a background in finance and medical office management, Jeanne is currently focused on improving her financial well-being and aims to help others do the same.
Many new college graduates have grand plans for their futures. Once they secure a job, they might feel they can relax a bit financially. However, even though their days of being a broke college student are behind them, it’s crucial to spend wisely to avoid several financial pitfalls that recent graduates often face.
1. Buying Things They Couldn’t Afford During College
While their studying days might be over, their strict budgeting should not end immediately. Recent graduates should resist the urge to buy a lot of things they couldn’t afford during school, at least for a while. It’s wiser to wait until they are established in their jobs and have saved some money before making significant purchases.
2. Not Saving for Moving Expenses
After graduation, most college graduates will need to move out of their dorms or apartments. This involves packing up their belongings and moving them, which can incur costs even if friends help to keep expenses low. Truck or trailer rentals, packing supplies, and food while moving are some costs that can add up. Planning and saving ahead for these moving expenses can prevent financial strain.
3. Forgetting About New Place Fees
Moving to a new place often requires a security deposit, which can easily be overlooked amid finals and graduation celebrations. There may also be deposits for utilities, storage rental fees, parking fees, and other miscellaneous expenses. Graduates should save money for these fees to ensure they can cover them when the time comes.
4. Overspending on Entertainment
Another financial pitfall is the temptation to overspend on entertainment once they start earning a full-time salary. While it’s natural to want to enjoy their newfound income, they should be cautious. There are plenty of affordable ways to enjoy time with friends or a significant other, such as taking walks, playing board games, or cooking at home. These activities can help stretch their paychecks further and prevent running out of money before the end of the month.
5. Neglecting to Build an Emergency Fund
New graduates might feel overwhelmed with expenses and think they can’t afford to set aside money for an emergency fund. However, having an emergency fund is essential to avoid financial crises. Even if it means cutting back on non-essential items like cable or living with minimal furniture, saving for emergencies should be a priority.
6. Defaulting on Debt
Graduates with student loans or other debts need to find ways to make payments. Ignoring these debts can lead to defaulting, which can have serious consequences for their credit scores and future financial opportunities. To avoid this, graduates can negotiate terms with creditors or take on a side job to make extra money for bills.
7. Disregarding Budget Creation
Lastly, not creating and sticking to a budget is a common financial pitfall. Creating a budget that works takes some experimentation, and giving up after one failed attempt can lead to financial trouble. Successful budgeting ensures they manage their money well and can plan for the future.
As new grads look forward to their exciting futures, avoiding these financial pitfalls will help them achieve their goals and enjoy financial stability. What other financial pitfalls should college graduates watch out for?