Jeanne is a married mother of 2 children who works as a full-time freelancer and virtual assistant. She also helps out occasionally on the farm she and her husband own together. Her background is mostly finance and medical office management. She’s currently working to improve her financial well-being and hopes to help others improve theirs as well. Please let me know if you would like to guest post on RFI!
Many new college graduates have big plans for their futures. If they already have a job lined up, they may feel they can relax a bit when it comes to their finances.
However, although their days of being a broke college student are behind them, they should still spend cautiously. There are a number of financial pitfalls college graduates must face.
1. Buying Stuff They Couldn’t Afford During School
It may be true that endless classes and studying are over. That doesn’t mean living on a tight budget should immediately end.
Instead, college grads should avoid buying lots of stuff they couldn’t afford during school, at least for a while. It’s one of the common financial pitfalls some recent grads fall prey to.
They would be far wiser to wait until they get established in their jobs and save some money first. Then they can slowly purchase items they really need but haven’t previously been able to afford.
2. Not Saving for Moving Expenses
Mostly likely college graduates will need to move out of dorm rooms, apartments, or wherever they were living. Moving equals packing; either a little or a lot.
But in addition to packing up all of their stuff, they also need to move it. Even if friends help in order to keep costs down, there will still be some moving expenses. Truck or trailer rentals for large furniture, boxes, tape, and fast food while moving are just a few of them.
Being prepared for a move is the best way to avoid this financial pitfall. College graduates should plan ahead and save up to make sure all costs are covered.
3. Forgetting About Fees for a New Place
College grads moving to a new place may be required to pay a security deposit on it. Amidst finals and graduation party plans this expense may have been forgotten about.
Of course, there may also be utilities deposits to worry about, storage rental fees, parking fees, and other expenses. That’s why these fees are another of the financial pitfalls for college graduates to keep in mind.
Grads should save up money to be prepared for these types of fees. That way when the time comes to pay for them, the funds will be there.
4. Overspending for Entertainment
Another of the financial pitfalls for college graduates to be wary of is overspending for entertainment. Obviously full-time employment will put more money in their pocket than they had before. But that doesn’t mean they should blow it all on the weekends.
If they have a significant other or partner there are plenty of ways to enjoy a night out cheaply. They can go on long walks together, play board games, cook something new, or any number of other inexpensive things.
Enjoying these inexpensive but fun activities allows their paychecks to be stretched further. It also prevents them from running out of money for bills before the end of the month.
5. Neglecting to Build an Emergency Fund
New graduates may feel they have so many things to pay for they can’t build up an emergency fund. But this is a financial pitfall that they need to find a way around.
Even if they must do without cable or live with almost no furniture they need to save for emergencies. Otherwise, the first money crisis could put them in financial hot water with little hope for a way out.
6. Defaulting on Debt
When student loans, or other debts, are owed, graduates have to find a way to pay them. Not paying risks defaulting on their student loans or other debts.
They may feel as though it isn’t that big of a deal. The reality is that during that moment defaulting may not seem like it’s very important.
Still, the first time the grad needs a loan for something it will become a big deal. Their credit score may be too low or they’ll have unpaid accounts with a credit collection service. These circumstances will probably prevent the college graduate from getting the loan they may need.
To put a stop to this situation before it begins, college graduates can call creditors to negotiate terms. They could also take on a weekend job temporarily or an evening side hustle to make extra money for bills.
7. Disregarding the Creation of a Budget
Disregarding the idea and creation of a budget is another of the financial pitfalls for college graduates. Making a budget that works is the key.
There are many different ways it can be done. Therefore, grads may need to experiment with several different types of budgets to find one that works for them. Giving up after the first failed attempt is often the financial pitfall of new graduates.
New grads are very likely excited about the future and what it holds for them. But to make the future all it can be, these financial pitfalls for college graduates should be avoided.
What are some of the other pitfalls college graduates should watch out for?