After the handshake snapshots and cheers have commenced the next few steps you take off the stage are filled with feelings of accomplishment and hope for the future. These are wonderful moments which you should take to heart as you venture to achieve your next set of goals, for traditional and nontraditional students alike this benchmarking process should also include financial planning. Consider some of these common money mistakes graduates make and how to avoid them as you move to the next life stage.
Not re-evaluating the personal budget
Every major decision in life begins with assessing a current situation and finding areas to improve and grow. Figuring out your personal or family finances requires the same level of thought and attention once course work is no longer a factor. On top of the regular bills that you have become accustomed to paying, it is likely that you want to start saving for those big rewards that come with big dreams. Whatever the future you envision may look like, the biggest mistake is to assume it will just fall into place. There will surely need to be adjustments in order to effectively plan for the future and by not doing so you may be setting yourself up for challenges that you could have avoided with simple preparation.
Avoiding the pitfall – Monthly budgeting
So you’re ready to begin but where do you start? For traditional college students who have lived close to campus for nearly four years this may mean factoring a higher monthly cost for regular expenses such as gas expenditures for a longer commute to that newly gained full-time job. It’s relatively common for rent prices to be higher outside of the college area so researching affordable living options is important. Nontraditional students that have taken classes online may have a savings advantage in terms of their school budget, but make the mistake of putting other debt areas on the sidelines. Now that school is over, pay back any debts you may have incurred in other budgetary areas over time.
- Keep a calendar of monthly due dates for bills and set reminders a few days in advance to ensure you have enough time for payment to go through.
- Consider online tools for setting goals and monthly budgets to help stay on track with your commitments.
- Don’t forget to also make an annual goal to reach as a result of your month over month fiscal efforts.
There are many cloud-based tools that can help you with this step. Mint is one of my personal favorites that is not only robust but helps users save money by offering the service for free. Connect all of your accounts in one spot instead of logging into a credit card provider here and a bank there.
Ignoring Student Loan Terms
As students we’ve all heard it – student loan debt has reached a critical point in today’s economic landscape. Although filing for aid is definitely a positive while in school in terms of short-term support, like any other loan repayment must be taken seriously after students graduate. This applies to all college graduates regardless of whether a school is nonprofit or for-profit, public or private, nearly every student takes out some form of loan and each one is different. The standard disclaimer “terms and conditions may apply” is not a joke and the conditional word in that phrase is always “will” when it comes to student loans. Do not make the mistake of procrastinating on preparing for repayment it is one of the most significant money mistake graduates can make.
Avoiding the pitfall – Plan and pay it forward
This is where that math or finance class you may have hated can come in handy. Many loans give you a grace period to allow you to get all of your finances in order and plan those payments into your monthly budget. Understand loan repayment basics and be sure to take advantage of this time by contacting your loan service provider and understand all of the terms before moving forward. Research all of your options in term of pay periods and duration, some of which you may have already looked into when you initially applied for financial aid. Missing some of these alternatives can put unnecessary strain on your bank account.
Once you have evaluated all the details it is essential to plan those pay periods into your monthly or annual spending. In addition to the formal loans, don’t forget the small ones you may have borrowed for school supplies or other related expenses from your personal network. Thank them not only for their financial assistance but also for all the other ways they supported you through your journey. Consider paying it forward by giving back to future alumni by donating to a scholarship fund for other rising stars in the community.
Failing to Negotiate For a Higher Salary
In school we learn that economics is cyclical but we often make the mistake of assuming a company won’t give you a raise because this year it may be under a tight budget. Although this may be true on spreadsheets, it does not mean that your employer is closed to the idea. You won’t know unless you have brought it up and tried to push for more, and at some level all employers expect some haggling over salary and benefits. In fact by standing up for your worth by negotiating for more funds can be a sign of professionalism, while giving you valuable experience into how your organization operates.
Avoiding the pitfall – Stand up for yourself
MoneyZen blog, produced by a wealth management company, provides advice on how to leverage your new degree credentials and stand up for yourself as a quality asset to your organization. It states that this simple request after expressing enthusiasm and appreciation for a job offer or future advancement position can eventually lead to hundreds of thousands of dollars more in lifetime earnings, recommending:
Practice your job offer conversation in advance of receiving any potential offers so you’re ready to land a better deal and research your field ahead of time so you know what to expect. If the salary really is fixed, then consider focusing on other benefits, which can be worth as much as a third of the salary but job seekers often overlook. What are the health care benefits? Retirement account perks? Vacation days? Work-at-home flexibility? Decide what’s important to you and get ready for some professional haggling; it usually just takes one round of back-and-forth.
Waiting to Save and Invest
Don’t get caught up in the idea that you simply don’t feel like you have the “extra” money to save for the long-term. Ideally, once you have graduated you have either advanced in your career or attained a new job, and in both of these cases technically you should have more money than you did during school. Right? This is actually the perfect time to start saving and the first priority is to establish an emergency saving account with at least three months of expenses that you can get through any unexpected life challenges.
Avoiding the pitfall – Leverage the percentage
Most financial planners recommend that you start saving at least one-quarter of your income for future goals, including retirement. If your employer offers any type of 401(k) matching program, take advantage of it because passing it up is like saying no to a pay increase. After that, open up an after-tax savings account for your other goals, including everything from home ownership to traveling.
If this seems daunting MoneyZen suggests to start by funneling a modest 2% of your income into a high-yield saving account or money market fund then slowly raise that percentage over time. Once you have that golden number that equates to three month emergency fund banked, then advance to investing in longer-term savings in low-fee index funds and other more aggressive vehicles. Here is some more advice to look into as well:
Catch up on retirement savings with these 6 tips: http://t.co/sDGA2UvwDW— Money Magazine (@MONEY) May 11, 2014
The Bottom Line – Planning makes perfect
Just like in life there are many other complex factors that can influence your financial situation but the most important thing to realize is that planning is a must. Take advantage of your personal network for advice from others who have been there and refer to the experts for the things you may not be well versed in.
Although all this business talk about money mistakes graduates make is important, also remember to congratulate yourself for your great accomplishments. Another one of the biggest mistakes new alums make is to not travel and experience the world to celebrate. There are some amazing destinations out there to visit after graduation, find one that intrigues you and go for it! Enjoy work and life because time is made of happy moments in both realms.