May is the time that many young adults are ready to venture into the world armed with a degree and hopefully soon a great job. With all of the excitement, financial matters are often forgotten which can be detrimental to their long term success. This is a critical time financially speaking for young adults with several important decisions and financial moves that need to be made.
What are some of the most critical decisions college grads need to make early on?
Deciding how much of their income to spend on housing and transportation because these can be two of the largest expenses. Overspending on these two needs can really lead to a difficult financial situation in that you don’t have enough money left for other essential expenses. This is especially true for a college grad who has student loan expenses.
Is there a financial tool that a college grads should use?
A basic budget is a great tool for all college grads to utilize. With online and mobile options, completing a budget is fairly easy. What is most important is using realistic numbers for expenses and accurate income. One major mistake is using gross pay instead of net pay when developing their budget. If they avoid this mistake and research other expenses properly, they will have a very useful tool to use in making financial decisions.
What are financial missteps that recent college grads need to avoid?
Relying too much credit to fund the expenses as they start living on their own. Building a large amount of debt early in life is a huge burden to overcome. Finding ways to keep debt down when starting your career is very important especially for those who have student loan debt. Unfortunately, it is very easy to quickly build debt with by now pay later loan options and low minimum payment credit cards.
What is good plan to keep debt down when starting out?
Drive older cars, share an apartment or house with a couple of roommates, or even live with your parents. All of these moves will provide the extra money to fund the essentials for living on your own. There are considerable costs to consider when starting out including security deposits and costs for starting services so having a stockpile of cash is critical.
What other advice do you have for keeping spending under control?
Adjust your lifestyle to your budget. This means cooking more, maybe less entertainment and most importantly, find a hobby or volunteer activity that keeps you busy. Too much free time is the biggest budget killer as we all tend to find ways to spend money when we are bored. Save for your fun and you will realize quickly that spending with savings rather than credit card debt is way more rewarding over the long term.