Financial Missteps to AvoidSubmitted by Madison Planning Group on September 10th, 2018
Financial Missteps to Avoid
While so much of personal finance is common sense – don’t spend more than you make, don’t buy a house you can’t afford, start to invest money while you’re young, many young people today enter the workforce fresh out of college, with a boatload of student loans, and with no clue how to properly manage their money.
The truth is that many young adults struggle out of college, finding themselves further in debt in just a few years’ time, simply because they’ve never been taught how to manage their finances properly. While some high schools and colleges are beginning to offer financial management classes, these classes are usually voluntary, so many students don’t take them.
Fortunately, there are many things that 20-somethings can avoid (and one thing they can do) to create a debt-free, financially sound lifestyle.
Avoid an Expensive College
As a recent graduate, you may be toying with the idea of graduate school. Before you take out even more student loans, make sure that continuing your education is paramount. Obviously, some career paths will require an advanced degree, but if this is purely a desire on your part, take a breath and work for a while before committing to more college. If you find a job in your field of choice, you may be able to take advantage of financial aid from your employer. And if you absolutely must continue your education, try and apply to more affordable schools.
Don’t Live on Credit Cards
Credit card companies and other financial institutions are more than happy to provide financially struggling young adults with credit cards. While establishing credit and using it responsibly is part of being an adult, spending cards to their limit each month and paying only the minimum will put you in a huge financial hole before you’re thirty. Instead, make small purchases and pay it off monthly; reserving the balance of the card for emergencies. Your credit score will go up, and so will your ability to make larger purchases down the road.
Buying an Expensive Car
While some areas require a vehicle in order to get around, most urban areas offer a decent transportation system, so you may not need a vehicle at all. If you do need a vehicle, make sure you find a reliable car that doesn’t require a lot of maintenance, gets good gas mileage, and does not have a monthly car note. Remember, if you do purchase a car, you’ll also have to deal with the cost of gas, insurance, and if you live in the city, parking fees.
If possible, don’t put yourself in a situation that requires you to borrow money, even from family. While there can be emergencies that happen where you’ll have no choice but to borrow money, don’t get in the habit of spending your paycheck and then turning to friends and family for additional funds.
Start Saving for the Future
If you’re working for a company that has a 401k plan, be sure to take advantage of it, even if it’s just a small percentage. It’s never too early to start saving for the future.
While financial planning classes may never be part of the college curriculum, there are plenty of ways to be financially responsible in the future, starting now.
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