Vintage Gen Y Wealth: 14 Dumb Mistakes That College Graduates Make

by RJ

in Self Improvement

This post was originally published May 2010. But still has relevance, if not more, today.

Welcome to the rest of your life.

Working with recent graduates on planning their financial future, I’ve seen it all. Below is a list of the 14 common mistakes that college grads make.

# 1 – Not Knowing Their After-Tax Income

Your salary calls for you to make $40,000 a year. That means your making $3,333 a month, right? Which means you can afford that $600 car payment; it’s only 20% of your income, right?

I’m sorry to tell you, that’s not the way it works. First, you have taxes. Plus, health insurance (it’s not free, you pay a portion) and 401K withdrawals. All of a sudden your after-tax income looks more like $2,300 a month. I’f you’re looking to plan ahead, your after-tax pay will be about 2/3 of your before tax income.

# 2 – Taking The Summer “Off” Because the Right Job Offer Hasn’t Come Through

If you haven’t found the right job, that doesn’t mean you can take the summer off or worse return to the same job you hadlast summer. You have options including:

  • Spend 6-8 Hours a Day Finding Job Opportunities Beyond CareerBuilder and Monster
  • Creating Your Own Grad School
  • Working For Free
  • Starting Your Own Business
  • Traveling – There might never be a better time, just don’t go into debt to do so.

# 3 – Not Understanding Employer Benefits

If you find a job,  go through your benefits package with a fine tooth comb. Know the difference between an HMO and PPO. Know what an FSA is and how you can benefit. Sign up and start investing in your 401K, at least up to your employer match.

# 4 – Losing Touch with College Friends

It’s easy to lose touch with college friends. Check in with your old roommates to see how life is going.

# 5 – Thinking That You Can Start Roth IRA Later

If you don’t start the habit of paying yourself first when your first paycheck arrives, you never will. Set up a Roth IRA and dollar cost average into that fund once a month. It’s never easier and there’s never a better time to start investing.

# 6 – Believing that Learning is Over

I graduated four years ago. If I went back and took my finals from my last semester, I would fail them all.

After college is where the actual learning takes places. If you’re not reading at least a book a week and industry research papers, you’re falling behind someone who is.

# 7 – Thinking About Going to Grad School Because the Job Market Sucks

Please don’t do this. You don’t want to get yourself in a situation where you’re graduating with six figures in debt and still have no real job experience.

# 8 – Creating High Overhead Expenses

One of the major advantages you have right now is that you can do almost anything. You can start your own business. You can get a job just because you can move across the country. You can travel the world.

The moment you start creating monthly expenses for yourself such as rent, car payments (don’t buy a new car), cell phone contracts, etc… you decrease your flexibility. A trait that you will never be able to get back.

# 9 – Living by Yourself

A great way to keep monthly expenses low is to live with roommates. You have the rest of your life to live alone or with your spouse. Enjoy splitting the cable bill while you can.

# 10 – Going on a Shopping Spree for your Work Clothes

Don’t go out and spend $1,000 on a clothing before you step foot into the office. Slowly build your wardrobe.

# 11 – Not Having a Plan to Get Rid of Debt Accumulated in College

Decide right now how you plan to pay off your student loans and any credit debt you have.

One of the worse things you can do is to defer your student loans. Start paying them off today.

# 12 – Going Without Health Insurance

There are a lot of cheap options to get health insurance for recent grads. First, your school might offer some form of continuing coverage. Second, you can add yourself to your parents plan. If those two options are not available, purchase a high deductible policy, which can cost only $100 a month.

Don’t go without health insurance. The wrong accident can set you back financially for life.

# 13 – Waiting to Sell Your Textbooks

For the majority of college graduates, you will never use your textbooks again. Sell them now before summer school starts. Chances are next year the publisher of your textbook will change a few numbers around and charge $300 for a new book.

# 14 – Leaving Up Pictures of You Doing a 3-Story Beer Bong on Facebook

It was fun and I know it was your profile picture for a long time, but it’s time to let it go. Remember, Google Search is now your cover page to your resume.

Closing

Congratulations to everyone graduating. I’m looking forward to see the great thing you’re going to achieve.

For those who graduated, what do you regret doing or not doing once you got out of college?  Please let me know in the comments.

If you enjoyed this article, the easiest way you can help me out is to take a second and retweet or share this post on Facebook. Thank you for your help!

Related Posts on Gen Y Wealth

{ 15 comments… read them below or add one }

AustinNo Gravatar May 7, 2010 at 7:29 am

Graduated last June and I see all of these mishaps in regards to people I graduated.

I’d add the belief that you will make more $ someday and it’ll fix your problems. It’s not realistic. Life is simpler at 23 than 33 so get going now and make things easy on yourself when you have kids and a mortgage.

Great stuff, man!

Austin @ Foreigner’s Finances
.-= Austin´s last blog ..What’s a Routing Number? =-.

Reply

RJNo Gravatar May 7, 2010 at 8:17 am

Austin. Exactly. Stop waiting for money to solve your problems. Money is usually not the problem.

Reply

John HunterNo Gravatar May 10, 2010 at 11:20 am

It is very easy to start off your post college financial life with a few missteps that will damage you for even decades to come. I think a huge key is to keep fixed expenses low to start. Don’t try to rent your own place right away. Don’t buy all sorts of new toys and clothes right away. If you can afford to start adding to your 401k, but if you can’t keep your expenses low and build up an emergency fund. Then start adding to your 401k in a few years and add expenses only after you have established a strong financial position.
.-= John Hunter´s last blog ..Bogle on the Stock Market and Investing =-.

Reply

RJNo Gravatar May 11, 2010 at 10:33 am

@John – Couldn’t agree more. Keeping expenses low creates a lot more flexibility in your life. This is what’s required when your just starting your career.

Reply

FinEngrNo Gravatar May 11, 2010 at 11:32 am

RJ:

Great round-up of ideas, let me sum up in one word: complacency.

Graduating from college is a big accomplishment, but resting on what you’ve already done versus looking forward to what you need to do will set you back.

Here’s a question for you – how is it that generationally people don’t seem to learn their lesson? Parents wish they had started investing earlier, but don’t make concentrated efforts to educate their own children.
.-= FinEngr´s last blog ..Yakezie Weekly Round-up: Mother’s Day Edition =-.

Reply

RJNo Gravatar May 12, 2010 at 2:27 pm

@FinEngr – Interesting question. Just off the top of my head, very few college grads are really looking for advice from their parents. They take advice from their parents with a grain of salt. What do you think?

Reply

RJNo Gravatar May 12, 2010 at 2:27 pm

@Austin – Couldn’t agree more.

Reply

FinEngrNo Gravatar May 12, 2010 at 7:19 pm

@ RJ:

Reason we can’t heed the advice – because every generation there’s a new get-rich-quick scheme and every generation the fever of greed takes over.

Solution?….I’ll have to think some more.
.-= FinEngr´s last blog ..Yakezie Weekly Round-up: Mother’s Day Edition =-.

Reply

EricNo Gravatar May 11, 2011 at 3:28 pm

These are some awesome tips (even for someone who has been out of school for sometime.

I do not, however, totally agree with #11 regarding loan deferment. I’ll be attending grad school in the fall and I’m choosing to defer my loans. I’m doing this so I can set aside the money I’d use to pay them off in a savings account, allowing it to accumulate interest, and then I can pay it off in a lump sum when the loans leave deferment.

What’s your argument for not deferring? The only one I can think of (a fairly legitimate one, at that) is to not carry too much debt in your name because it can affect credit and future loans (e.g. a mortgage). That varies depending on one’s life circumstances, of course.

Reply

RJNo Gravatar May 12, 2011 at 10:25 am

It more depends on what type of loan, subsidized v. unsubsidized.

If it’s unsubsidized, interest accrues. With savings accounts paying so little, this strategy isn’t optimal if the alternative is saving in a bank account.

If it is subsidized, interest doesn’t accrue. Which then deferring could make sense. However, I think one is better off to start the process rather than delaying. Even if that means working on the side.

Just my two cents.

Reply

GKVNo Gravatar May 12, 2011 at 10:21 pm

I normally read your blog entries through Google Reader, but I didn’t see this one until I visited the site. Is this a technical glitch or have you stopped the RSS feed?

Reply

RJNo Gravatar May 13, 2011 at 8:01 am

GKV – The problem was that it’s a repost. That’s why I’m guessing it didn’t show up in the RSS feed. I still plan on offering the RSS. Sorry about the confusion.

Reply

gradeNo Gravatar April 14, 2012 at 8:54 pm

you guys are so right. this info can help a lot of people. dont wait for $, earn it and work at a job you like to do. i like animals and i want to be a vet. take my example. think “what do i like or like to do” then try find a job that fits you and what you like. hope you like my tips.

Reply

gradeNo Gravatar April 14, 2012 at 8:59 pm

Austin Jhon and RJ are helping a lot of people out keep it up guys=3

Reply

gradeNo Gravatar April 17, 2012 at 9:49 pm

every since i found this blog i was thinking theses guys are right. if you worry about money then you get stress. and who knows you might already have enough stress. if you have a lot of stress then trust me dont worry about $. money will keep adding stress so do not worry about it in the first place.

when you start to worry about $ then it is very hard to not stop worrying about money. so take my advice, if you are stressing with money try get a part time job and stop buying expensive things like tvs or guitars. only when you trust yourself with your money should you buy those things. you need to buy food drinks etc so if you are stressed with your money try to get a job.

Reply

Leave a Comment

Previous post:

Next post: