For today’s college graduates who are beginning a new phase of their lives in the “real” world, this new article from Bankrate offers some solid advice on how to get your finances off to a good start, by avoiding five common financial mistakes.
Unless you want your 20-something years to be defined as the decade you drowned in debt, you must be proactive about how you handle your finances.
A major part of stepping out of college life and into adulthood is taking control of your cash and setting up financial goals – for the not-too-distant future and the decades ahead.
You won’t get very far if you ignore your finances, says Gail Cunningham, a spokeswoman for the National Foundation for Credit Counseling in Washington, D.C.
“Not having years and years’ worth of financial experience under their belt yet, (millennials) really may be quite confused and not know what to do,” she says. “And often when that’s the case, people tend to just look the other way.”
But pretending the money issues don’t exist won’t do you any good.
“I’ve never seen a financial problem resolve itself,” Cunningham says.
Once you have that degree in your hand, you may feel like your picture-perfect career is right around the corner. But bring that optimism down a few notches. It’s too costly, Cunningham says.
“For (young adults) to assume that they’re going to land that job of their dreams can be too optimistic in this current environment,” she says. “What they would do wrong then is maybe they’ve driven an old clunker through college and they’re anxious to get a new one … and they rent more of an apartment than they can actually afford.”
Alan Moore, a CFP professional and founder of Serenity Financial Consulting in Bozeman, Montana, thinks the reason young adults make decisions like this is because they expect to have the same comfy lifestyle they had while growing up.
“We tend to forget that it took our parents 20 years to build up to the point that they had that lifestyle.”
It’s extremely important to set up a budget, and a savings account.
“The first mistake people make is not even having a budget and just not even thinking of it as something that they need to do right now,” says Moore.
With a savings account, you may not be able to save thousands of dollars right away, but you can start small.
Let go of the mindset that opening a savings account is for retirement purposes only, Moore says. Everything from planning a long-distance family visit to taking care of car repairs requires setting money aside.
“The alternative is you end up in a hole where you put it on the credit card because you didn’t have the money, and then you’re paying that off for the next six months,” he says.
And not taking the time to look over your credit reports is a huge no-no. This is especially important if you frequently change addresses.
