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

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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.

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Tagged as: college, graduation