Lack of Financial Understanding

“Fresh graduates often are not familiar with how to manage money and make mistakes by taking out debt for cars that they shouldn’t purchase right away and thinking they are behind by comparing themselves to other older people. It’s very common for fresh graduates to buy a $20,000 car because it looks nice instead of buckling down to pay off their student loan debt or save for a car in cash. This can delay fresh graduates from getting a head start on their lives and careers because they may not fully understand the basics of personal finance. I believe it’s critical for fresh graduates to educate themselves and spend time on financial literacy so they don’t make bad mistakes when it comes to their money. There are a lot of resources available online and books to read that will give foundational knowledge. My favorites to recommend to fresh graduates are Rich Dad Poor Dad by Robert Kiyosaki and The Total Money Makeover by Dave Ramsey. These two books provide great information on how to manage and understand money. It’s all about educating the younger generation so when they get older they aren’t behind with understanding money management. These are some of the tips that can be used when it comes to fresh graduates understanding money.”

Neiko Johnson, Personal Finance Money Coach, Co-founder of Secret to Finance

Dealing with Student Loans

“Not starting to pay off student loans during the grace period. Graduates who have student loans are given a 6 months grace period, but instead of using that time to pay in advance, they tend to disregard it until they will receive a one-time notice of the bill. This will eventually cause bigger problems and stress. So in order to avoid these inconveniences, graduates should start paying off their student loans slowly during the grace period so they won’t end up in getting more debt in the future.”

Robert Johnson, Founder Sawinery

Keeping a Budget

“Since most colleges do not offer financial literacy classes, most college graduates have little or no knowledge of how to manage their income. But, just as critical as landing your dream career, mastering your financial life is crucial. Securing a decent salary won’t matter in the long run if you’re not keeping any of your earnings. Avoid making the mistake of not developing a budget if you’ve just joined the real world and are trying your hand at this adulting thing for the first time. After graduation, you’ll most likely take on more financial obligations, such as rent, transportation, and groceries. Managing these additional costs would necessitate better tracking of your spending and the creation of a budget to ensure that you can fulfill all of your obligations. You’ll know exactly where your money is going if you have a budget in place, so you won’t have to worry too much about your finances. If you’re not sure where to begin, consider installing a budgeting app or setting up a spending tracking system. Understanding your financial situation and budgeting for it will help you manage your funds more effectively.”

Alan Harder, Mortgage Broker, AlanHarder.ca

Negotiating your Salary

“Failing to negotiate for a better salary is often one of the common mistakes fresh graduates make. Recent graduates are still unfamiliar in dealing with job offers so more often than not, they make do with the low salary given to them. This may seem odd for new grads, lack of work experience equals low salaries after all, but most companies do expect you to negotiate when it comes to salaries. This is often a sign of professionalism and shows that you have a good understanding of how the business world works. Of course, don’t forget to research beforehand so you are better informed and have an understanding of what it is you want.”

Matthew Paxton, Founder Hypernia

Focusing only on their Starting Salary

“The benefit of being an employee is that the employer needs to attract good talent, and they do that through competitive benefits. I would suggest recent grads focus on total compensation rather than starting salary. This can be found in different benefits like subsidized healthcare, 401(k) matches, Health Savings Account contributions, etc. The CARES Act also had a provision that employers can make tax-free payments to student loan debt which expired at the end of 2020 but has the potential of coming back under the Biden administration, that recent grads with debt could potentially benefit from. Another point on this is to focus on the potential growth in the company and with their income. Starting salary is just that, the start. But finding ways to grow at the start of their career is much more important in my opinion than making a bit more in their salary. Things like personal development stipends, opportunity to learn or pursue further education or designations, etc.”

Logan Murray, Financial Planner & Tax Preparer

Fresh grads can improve their financial understanding by following the professional advice here. By doing so, they could significantly improve their financial management. You don’t have to spend the next many years in a financial rut just because you are a fresh graduate. Know better, do better, avoid these financial mistakes.

Author

  • Editor in Chief Melissa is a well-known financial analyst for Top U.S companies and has hosted muliple Executive Finance Programs internationally. She now spearheads the team alongside our senior editor.

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