Tips for Recent Graduates to Avoid Financial Mistakes

For parents with college graduates at home this summer, now is a good time to talk about money.

There are steps families can take now to get off to a strong start financially.

Many college graduates are already struggling with student loans they have to pay back. According to consumer lending service Bankrate, mishandling those loans is the biggest mistake they can make.

Bankrate estimates that the average student with a bachelor’s degree from a public four-year school has more than $27,000 in debt. For many, paying off their debt is a big challenge.

Common mistakes include missing or late payments, not making the minimum monthly payment, and not refinancing when better interest rates are available.

First, If monthly payments are beyond a graduate’s ability to pay, they should request a moratorium or reduction in loan payments.

The second mistake many people make is not establishing an emergency fund. Bankrate found that 20% of adults who have or have had student loans put off saving for emergencies. This fund should cover six months’ worth of expenses.

The third mistake is not living within your means. Setting up a budget with categories for spending your income can help you avoid overspending. Then it’s important to stick to your budget.

The fourth mistake many people make is not saving for retirement. While this doesn’t necessarily have to be a priority for young professionals, the earlier you start saving, the better. If your employer offers a 401k plan, employees should consider taking advantage of it.

The fifth and final mistake is not saving for future goals, like a house or a dream vacation, or something in between. Some bank accounts are designed to make it easy to save in specific categories to reach your financial goals.

Experts also recommend that college graduates consult with financial advisors or relatives who can advise them on financial matters.

There are also some great budgeting apps, like Mint and Rocket Money, that can track spending and create custom parameters to help users stay on track with their goals.