With winter semesters across the country coming to a close, soon-to-be college grads will be anxiously awaiting the end of the spring. Proud students will walk away from their educational institutions with the degrees they have expended blood, sweat, tears—and hundreds of thousands of dollars—to earn, and with a wealth of knowledge and experience that will send them off into their adult lives. In a nation still recovering from several financial crises, and where the cost of higher education leaves the majority of graduates in debt, the thought of navigating the post-grad financial waters may be a bit daunting for some– and understandably so. Moving away from home and managing many new responsibilities—financial and otherwise—will be difficult in the beginning, and of course, some will make much worse decisions than others. The following describes the top3 most common financial pitfalls newly graduated young adults tend to make:
Moving Out Without the Means
We are all told early on that living outside of ones means can lead to trouble, but at no other time is this more true than right after completing college. Most grads will want to avoid moving back home after school, but without the help of student loans to pay their housing (quite the contrary—many loans will have fallen into repayment by then) this becomes an especially complicated issue. Rent and student loan payments are only a small portion of the equation—food, utilities, transportation, etc. have a way of piling up on unsuspecting post-grads. If living at home is an option, you will find you have much more financial flexibility when it comes time to take what you’ve saved and move into a place of your own.
On top of the student loan debt many face after college, millions of young adults are also roped into using pricey credit cards to pay their expenses, or large sums of money in the form of personal loans. Incurring this often unmanageable debt sets post-grads up for failure from the get-go. Not understanding interest rates or built in features of a particular plan cost them much more money in the long run. Lawsuit settlements loans are a smarter investment when it comes situations in which the recent grad is unable to work or is involved in debt incurred by legal issues. This type of loan can actually help graduates pay their bills and manage their finances while complex or lengthy settlements are being reached. Avoiding late payments will also improve credit and the standing of personal financial records.
Avoiding Effective Budgeting
For those who are lucky enough to receive relatively well paying jobs after graduation, it can be difficult to be responsible with your earnings and resist the urge to spend more than what is saved. Keeping a detailed record of your monthly earnings versus your monthly expenses goes a long way in identifying where too much is being spent, and where that much more can be saved. Emergency funds or long term savings will ensure that there won’t be any need to take out expensive or unnecessary loans, which ultimately can help recent college graduates avoid huge pitfalls and start off toward a future of financial security.
Author Bio: Hailey Andersen is an avid blogger who enjoys sharing her insights on financial planning and education.