The ceremonies are over, the days of exams and ramen noodle are behind you, your resume is appearing in the inbox of countless hiring managers. You’re a new grad — and you’re most likely newly financially independent. Though assuming full responsibility of your wallet might seem daunting, avoiding these millennial money mistakes can help you start saving, develop good habits, and set the tone for a healthy financial future.
Getting Overly Excited By Your First Paycheck
After years of paying to do schoolwork, you’re finally getting paid to work — and, trust us, we know it can be tempting to elevate your lifestyle accordingly. But, while an indulgence once in a while doesn’t hurt, not setting a budget and consistently living above your means is a quick road to debt from your money mistakes.
Even if you are paying off your credit card balance each month, getting close to your limit can damage your credit score, which can hurt your ability to apply for better credit cards or loans.
Fresh out of college, you’ll want to enjoy your newfound freedom and your newfound paycheck — but immediately starting to save and invest will have large payoffs in the future. There are several ways you can, and should, be investing to avoid any of these so-called millennial money mistakes.
Learn if your employer contributes to a 401(k) account, and, if they do, learn how much they will match to take full advantage of the opportunity. If they don’t, use a Roth IRA calculator, where you can put away up to $5,500 a year. Other methods of savings and investing will help your net worth grow thanks to the magic of compounding.
Focusing On The Short-Term
While you need to be earning a paycheck, don’t let that paycheck consume all of your attention. Remember that, though a job allows you to pay the bills, to have secure finances and a sense of fulfillment, it also needs to give you a career. Think what you want to be doing in five years, and ten years. Will your current job allow you to do that? What decisions can you make to reach your goals?
Your twenties are a great time to figure out your passions, find the industry you care about and take more risks with employment.
Not Tracking Finances
One of the biggest ways to be smart about finance is to be aware of it: keep track of how much you earn, what you spend and where you spend it. Is more money going out than is coming in? Is your rent disproportional to your income? Are you spending too much on entertainment or clothes?
Just as thoroughly as you comb through your finances, you should pay attention to your credit reports. Go through each every month and make sure there are no errors that could hurt your score.
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