Congratulations to all the recent graduates out there. Whether you have graduated from high school, college or technical/trade program, you have earned some well-deserved compliments. But beware — there are some financial mistakes that graduates make that take them from “Glad-Grad” to “Sad-Grad.”
To avoid these consider the following three tips: Get an education, have a plan, and avoid and stay out of debt.
Get an education
Wait a minute — didn’t you just graduate? Well, hopefully your education never ends. This will keep your mind sharp and your endeavors interesting. But more importantly, it can put money in your pocket.
The Wall Street Journal points out U.S. Census Bureau data that show that the unemployment rate for high school dropouts was 11.2 percent in February. The unemployment rate for those with a high school diploma was better at 7.9 percent (nearly the national average of 7.7 percent). Yet the unemployment rate for someone with a bachelor’s degree was 3.8 percent (well below the national average). Consequently, and as you might expect, average incomes get higher the more education a person has. In addition, graduate degrees have earnings potential even higher than those of a bachelor’s degree.
Some may point to the fact that a large number of jobs today do not require a college diploma. While that is correct, they do require education of some sort. And this is the point; continue your education in some form or fashion. Employers look for employees who are willing and interested in learning new things, staying current in their field and furthering their education.
Staying educated is an investment that will pay you in many ways, including in real dollars. Just be careful not to accumulate significant student debt to get that education.
Have a (spending) plan
Think for a moment about whether or not you like to budget. Not many people would say that they do, and that can be problematic. As you venture out from your recent educational experience, now is a good time to evaluate your spending and have a plan.
The problem for most people when it comes to tracking what they spend is that there is no X-marks-the-spot. Most of us don’t really know where we are with our spending, and frankly, the thought of knowing scares us. But we must be courageous and find out.
The failure of many budgets is that they are an accounting function for pinching pennies and going without. With apologies to my friends in the accounting field, most people don’t want to be accountants. Also, budgets have accounted for what you have done in the past and are not usually viewed until well after the fact. Unless you like doing the accounting daily, you likely don’t have a good idea of where you are.
Well, we non-accounting types are all in luck. There are many new tools on the market (most of them free or very inexpensive) that do the accounting for us. They are computer-based, and most have an app for your mobile device. Such tools as mvelopes.com, mint.com, powerwallet.com and youneedabudget.com (and many others) do a great job of connecting to your bank and other accounts and giving you up-to-minute updates. Most will also allow you to articulate where you want to go and show you how you are doing. These tools are usually simple and easy to understand, as well as very powerful and necessary if you want to succeed financially.
Avoid and stay out of debt
As a new graduate, it can be very tempting to incur some new debt. We call it pent-up demand. You have waited to buy that car, couch, vacation — the list can be large. To avoid debt, consider whether you are making a life-sustaining or lifestyle decision. Will the purchase sustain life or simply create or sustain a lifestyle? Using tools like those mentioned above to plan spending would help you to know if you should and could afford that post-graduation present to yourself.
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