If you’re about to graduate college or have recently done so, a big congrats from YoungMoneyFinance! You’ve worked hard, have earned a degree and are potentially about to enter the workforce. Hopefully your degree and studies prepared you well for the working world and that you’ve landed yourself a decent job. I know it can be tough out there, especially for new grads – I left college with 1 job offer – and that’s the 1 I took!

Believe it or not, now is a perfect time to start developing good personal financial habits. If you can start managing your money now (presumably when it’s not a lot), you’ll be able to manage it later on after it grows! In addition to good habits, unfortunately there are plenty of bad habits that young professionals fresh out of college can develop. Let’s explore a few that are best to avoid as they’ll end up costing you for quite some time!

Get a car that’s too expensive

After slumming it through college, on public transport, wearing the same clothes day after day, eating subpar food, as soon as you get a decent job, it may be tempting to splurge your cash on, for example, a car that you can’t afford.

New cars depreciate as soon as you drive them off the lot. Allocating a large chunk of your money each month for paying for a new vehicle could be put to better use elsewhere, such as an investment that’ll accrue you a return over time to building your wealth. Thus leave the fancy pricey car, and stick to public transport, or purchase a smaller, economical car you can buy outright.

I personally watched friends buy or lease new Mustangs and BMWs while I kept driving my Jeep Cherokee that shook when I went over 70mph. It wasn’t glamorous but it was paid for and I was able to do a lot more with my money then let it go into a rapidly depreciating asset!

Get in trouble breaking the law

Driving foolishly is reckless, it’s dangerous, and when you’re caught – it’s expensive! Fines for any crimes should be avoided for moral reasons firstly, and secondly because it’ll cost you. 

However, if you do find yourself in a situation where you’ve, for example, received a DUI (driving under the influence), contact a Criminal Defense Lawyer immediately and use their legal support to familiarize yourself with your rights. 

I thankfully got my ‘reckless’ driving out of the way in college along with a few speeding tickets and accidents and traded my Mustang for a boring and safer sedan.

Expensive Wedding

If your wedding day is the most important thing to you, and you want to spend all the money you own on it, that’s entirely up to you. But, if you don’t have the money, and you’re taking out debt to fund your big day, it’s not worth it. 

Your love and commitment as a couple is not defined by how much you spend on your wedding day. Starting married life together in a significant amount of debt prevents you from moving forward with other things you both want to do with your lives. Such as affording to move in together, starting a business, saving for your joint retirement in Italy, and so forth.

Mrs. Money and I had a wedding on a budget but it was absolutely amazing! More money doesn’t mean a nicer wedding!

No Health Insurance

According to FaceTheFactsUSA, as of 2010, the average hospital stay in America costs $33,079. Once you start making an income, providing your employer doesn’t offer a good healthcare plan, investing in health insurance is essential. 

It’s easy to think we’re invincible when we’re young, but over time, there are plenty of situations that could slip the rug from underneath your feet – don’t be the person that does not have health insurance to cover those tough times.  

Take advantage of employer sponsored health plans with a plan that meets your needs. There are plenty of plans with lower premiums that offer care for those not going to the doctor a lot.

Avoid Retirement Savings 

Once you’ve left college, it’s easy to think you have years to save for retirement. Which, in a way, is accurate, however, if you keep waiting for a set paycheck before you put money aside. Before you know it, you’ll be 40, with other commitments to uphold, and no money left to support your livelihood when you retire. 

The best advantage of investing in your retirement now is the compound growth you’ll accrue. The later you begin saving, the less you’ll get back in the future.

I started out contributing 2% of my salary to my retirement and have slowly built it up over the years to just around 15%, which is recommended by most financial experts (this one included).

Summary

Many pitfalls college graduates succumb to can push them into debt and cause them to spend their earnings all at once, without planning for savings and the future. 

To avoid these money pits, you simply stay on the right side of the law, only buy what you can afford outright such as a wedding or car, and invest in health insurance and your retirement!

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