You’ve done it. You’re out. You survived college. Not only did you survive – you succeeded. You’ve obtained what so many people never will: the diploma. Now, you can stare at it every day. It’s yours — you earned it.
And now, you’re ready to celebrate. You’re a real adult in the real world and it’s time to start acting like it and start looking like it. But, before you go off and blow your not-yet-hard-earned dollars from your brand-new grownup job, take a step back and avoid these common spending mistakes new graduates often make.
Buying a new car.
You’ve been driving the same used car since you were 16. Well, before you go off and buy a brand new set of wheels, think about every associated cost. Right now, you’re probably covering gas and insurance, but the car itself is paid off. With a new car, you’ll face with monthly payments. Is that an extra $300+ a month you can afford to spend?
Leasing a new car.
Usually, this is a worse idea than buying a new car. Leasing a car grants an individual the ability to drive a car he or she can’t afford to buy. If you can’t afford to buy the car, you can’t afford the car. As Daily Finance reminds us, “A good rule to remember when it comes to car shopping is that you should buy your first new car when your net worth is over $1 million — a sum that leaves you well-prepared for retirement and rainy days.
Until then, stick with used cars.” If you don’t want to wait until you’re a millionaire, at least wait until you have your eight-month emergency fund in case your income stops abruptly.
Moving out of your parents’ house.
Trust me, I get it. You spent upwards of 4 years living independently far away from Mommy and Daddy. Now you’re expected to move back into your childhood bedroom? Yes. As soon as you graduate, start putting the money you would be paying in rent into a savings account. If you find that after six months you can easily afford to be set aside $500 a month, you can probably afford to move out. Bonus: You now have first and last month’s rent covered, as well as moving expenses.
Buying a new wardrobe.
For girls and guys alike, this is a big one. You graduate from college and realize your closet is packed with t-shirts, leggings and flip-flops. It doesn’t exactly scream “professional” but, before you go off and invest hundreds — or thousands — of dollars into an entirely new professional wardrobe, land yourself a job first. Make sure you have one or two nice, interview-ready outfits on hand, then wait and see what the dress code is at your new place of employment.
These days, more and more companies are moving toward business casual rather than business professional. A few pairs of khakis, dark-washed jeans and collared shirts may be all you need.
Buying a new pet.
While all of your friends were out buying puppies and kittens to accessorize their first apartments, you were smart and decided to wait until after graduation to make that kind of commitment. Well, best to keep waiting – at least for a few more months.
This is the most up-in-the-air season of your life. There’s a good chance you won’t be living in the same place or working for the same company a year from now. Wait for things to settle before committing yourself to supporting another life for the next handful of years.
Spending more than you earn.
At this point, you probably have a pretty decent stack of loans. In less than six months, you will be required to start paying them off. Add that to rent, a car payment and a new puppy (assuming you’ve followed none of my previous advice) — it’s a lot to have on your plate. While it is incredibly tempting to start joining your new coworkers for happy hour every night, going out to eat for every lunch and treating your friends to fancy dinners, reign it in a bit.
With new freedom comes new responsibility. Establish a budget before you start spending like there’s no tomorrow. Even though you have a steady income, spend a few more months living as you did in college. Build up a savings account and get your expenses covered.
It is incredibly tempting to skip straight into adult mode the second you walk across that stage. However, you need to be realistic about your financial situation. Now, more than any other time in your life, it is important to establish stable financial habits. Make good choices now and you’ll be leaps and bounds ahead of your classmates.
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