With graduation season coming to a close, college students around the world have happily thrown their caps into the air, ready to rush headfirst into the “real world.” In fact, according to a recent survey by Accenture, the class of 2015 is one of the most optimistic in years.
But new grads may want to temper their expectations after landing that coveted first job. The majority of their millennial peers from the classes of 2013 and 2014 made $25,000 a year or less at their first jobs. What’s more, the average 2015 grad has more student loan debt than any class that preceded them.
How can you keep a positive outlook while dealing with the realities of the economy? When every penny counts, a smart financial strategy can keep you on track, while anything less could have a disastrous effect. Here are five common mistakes college grads should avoid:
1. Not having a financial plan.
Creating a strategy for managing your money is key, no matter what your salary. One common route is to engage a certified financial planner (CFP) to help you devise a plan. Unlike a financial advisor, CFPs typically don’t care about your net worth — most charge a one-time fee for creating a financial road map based on your current situation and future goals. For a more cost-effective CFP, ask your parents if they use someone who might give you a family discount, or look for a CFP who is at an early stage in her career.
2. Going on a spending spree.
When you score your first job, it’s tempting to splurge. Goodbye ramen noodles, hello prime rib! However, having a “pay yourself first” mentality is how you’ll eventually build wealth. Splurging on the latest iPhone or a new car seems like a way to enjoy the benefits of landing a first job, but research shows that spending money on experiences (not things) actually boosts happiness in the long run. Plus, many “quiet millionaires” will tell you that those habits can turn small change into big bucks.
3. Letting student loan debt overwhelm you.
Student loan debt is pretty much a fact of life these days, even for families with high incomes. Heck, even President Barack Obama and First Lady Michelle Obama had thousands of dollars in student loan debt when they graduated from their Ivy League colleges (and things turned out pretty well for them).
The worst thing you can do is put your head in the sand and pretend your student loans don’t exist — because they’re not going away by themselves. Take charge of your loans by proactively looking into new solutions for dealing with debt. For example, if your loan payment is overwhelming your paycheck, check out income-driven and extended repayment plans for your federal student loans. And if you’ve landed a well-paying gig and have taken great care of your credit, you may be able to refinance student loans at a lower interest rate, reducing payments and saving money on interest to boot.
4. Neglecting to take advantage of free and low-cost tools.
There’s a reason why “there’s an app for that” has become such a ubiquitous catchphrase. These days, it seems like there’s an app, tool, or website designed to help people do pretty much anything — and managing finances is no exception. Whether your goal is to create and stick with a budget, invest in the stock market, or get a handle on your student loan debt, there are a ton of great tools out there to help you achieve your objectives.
5. Not finding a financial mentor.
You may have already been advised to find a mentor for your career, and this tip can also help you in your financial life. The great thing about mentors is that they’ve already been through it, so you can tap their experience without having to reinvent the wheel. Whether your mentor is someone you never talk to — like Warren Buffett — or someone you meet with on a quarterly basis, like a family friend whose advice you trust, there’s a lot of free financial advice out there. You just need to take the time to ask.
Christina Kramlich is a member of the DailyWorth Connect program. Read more about the program here.