Graduation season is upon us!
In the next several weeks, students from all over the country will be sporting their cap ‘n gown, bouncing down the aisle at their ceremonies with bright eyes and wide smiles – ready to embark on the next phase of their lives!
It’s an exciting time.
It’s also a scary time because so many of these same college grads – the ones who worked hard, studied intently and graduated with scholarly wisdom are not, in fact, money students and they’ll make some very dumb mistakes with their money!
I know this is true because I was one of them.
I graduated from college with some lofty dreams and poor money skills – even though I was a money student and was going into financial planning – go figure!
Here’s a look at five BIG mistakes College Grads make with their money:
1. Not Learning the Basics of Personal Finance
This is where it all starts. Unfortunately, many colleges don’t do a very good job of teaching money skills to students.
Sure they have personal finance courses, but most are not required and there is very little education on the do’s and don’ts of money management.
Grads should be put into a position to be the best money students and take advantage of the one asset that most folks wish they had back – TIME!
The bottom line is that everyone I talk to says, “I wish I would’ve started financial planning when I was younger!”
2. Think That a Credit Card is the Same as Cash
The hallways were buzzing with excitement. People were flocking around little tables that described the events, clubs and activities on campus.
It was the first day of school and I was checking things out.
That’s when it caught my eye – a table near the bookstore with a wide-smiled young guy waving a T-shirt and encouraging students to take one.
“Free T-shirt!!”, I thought, very cool.
The T-shirt had a picture of the earth on it, and although I don’t remember what the tagline was at the time, it went something like this:
The World – In Your Hands!
It was the T-shirt that a credit card company was handing out for signing up for a new card!
“Wow! The world in my hands – yeah, I can own the world!!”
I was a moth drawn to the light – I made my way over, signed up for the card and began a painful journey two weeks later when the card arrived in the mail.
I fell into the trap of thinking that my credit card was the same as cash. Sure, it sounds stupid now – but not at the time. I was swipin’ that thing every where I went and figured, “I’ll just pay it off when I get the bill”.
Unfortunately the journey continued after graduation and didn’t stop until I got serious about wiping out the debt!
How many college grads will embark on the same journey!?
3. Not Saving for Emergencies – Or At All!
“I’ll wait til I make a little more money before I start putting into my 401k”
“I’ll wait til I furnish my apartment before I start putting into my emergency fund”
“I’ve lived like a pauper for 4 years of college – now that I’m making money I want to have some fun!”
Ever say those things? Know someone who has?
Unfortunately, not saving anything is a HUGE mistake many college grads will make!
4. Develop a Habit of Overspending
Habits don’t form over night. Many overspending habits are formed during college and just continue at a more rapid rate once you graduate.
Some grads get a job and start making money and all of a sudden feel like they can buy anything!!
They spend and spend with little thought as to how they will pay for it.
Many grads will want to keep up with their friends who just landed great-paying jobs.
As Das EFX so poignantly put it - “You betta check yo self before you wreck yo self”!
Yes, I just threw a Das EFX reference in there!
5. Buy a New Car Without Knowing the True Costs to Own
Is there anything better than the new car smell?
It’s got to be one of the top 5 smells in the world – along with freshly- mowed grass!!
That new car smell can be so enticing.
It was for me. This was another mistake I made in college. I was making a little cash and wanted some wheels.
Who doesn’t, right?
True, but I leveraged myself beyond my ability, ended up doing a GM “Smart Buy”, which is a lease disguised as low monthly payments and a large balloon at the end!
Don’t be enticed. Get yourself in position for an emergency fund, start saving aggressively and then figure out if you can buy a new car or not.
What Other Mistakes Would You Include?
Readers, what are some dumb mistakes you made during college, upon graduation or in your early years?