College graduation marks the end of one stage in life and the beginning of a new one. The pursuit of a well-paying job and financial independence begins, and life takes on a new trajectory.
One common hindrance fresh graduates encounter is the lack of proper financial management skills. This guide seeks to introduce you to common money mistakes you are likely to make and how to avoid them.
1. Rushing to own a home
The moment you start getting a steady flow of income, the urge to buy a home becomes virtually irresistible. There is nothing wrong with early homeownership, but it is not a wise decision to rush into. It is costly, engrossing, and time-consuming. You want to be sure you have the time and the money to spend before committing.
2. Not creating a budget
It doesn’t matter how much money you make; the lack of a budget can take a serious toll on your financial progress. You are more likely to indulge in impulse buying and conspicuous consumption, only to find yourself with nothing by your next payday. A budget can help you circumvent that and instill financial discipline, while avoiding the hassle of jotting down notes every evening. You can easily use one of the numerous Google Sheets templates designed specifically for personal budgeting.
3. Not setting up an emergency fund
Emergencies are unpredictable, and lack of an emergency fund can reduce you to begging when the chips are down. Whether it’s a hospital bill that exceeds your insurance cover or sudden loss of a job, these events can wreak havoc on your savings account and plunge you in misery. An emergency fund braces you up for the worst and ensures you go about your daily activities with confidence and peace of mind.
4. Failing to look into the future
When retirement is more than 30 decades away, saving for old age may not come as common sense or a natural thought. Many people don’t prepare for retirement, and most of the time, this means being overly mean to themselves to meet their savings objectives. Setting up a retirement account or contributing towards your employer’s 401K upon landing your first job provides you with a longer savings period, ensuring you part with a smaller fraction of your salary.
5. Not setting a credit card spending limit
Credit cards offer a vast range of benefits: they ensure safer online shopping and help holders build their credit score. On the flip side, they can make you a reckless spender and prove a substantial financial burden in the future.
Besides finding a credit card that doesn’t give you too much freedom, it would also help if you included a card spending limit in your budget.
Financial discipline at an early stage is key to a debt-free and peaceful future. You can achieve it by avoiding the above mistakes and making moves with tomorrow in mind. Don’t shy away from seeking professional help if you find these too difficult to implement.