Key Takeaways
- Recent graduates may find themselves at a loss when it comes to managing money.
- Having a steady income is likely the first time they’ve encountered larger amounts of money.
- There are five common mistakes that people who are inexperienced with handling money tend to make.
Florida’s Governor DeSantis recently passed a financial literacy law that will go into effect in a few years. It will require that students take a half credit hour to learn financial wellness. This includes things like putting a budget together, balancing a checkbook, and understanding the basics of finance and the economy.
This is a timely topic, as this time of year sees young people graduating from high school and college, and many of them are getting their first full-time jobs. It’s not uncommon for them to also start making five common mistakes when it comes to money.
Why is that? Well, they’re suddenly finding themselves with a lot more money than they’ve ever had to manage. It’s new territory for them, so it’s not surprising they’re going to make these five mistakes:
1. They overspend on rent because they don’t realize that housing is going to be one of their biggest expenses, along with transportation. This is likely the first time they’re having to pay for either of these expenses and they may not have taken them into consideration.
2. They have no budget and no boundaries set on their money. Without a budget, it’s easy to just spend until the checking account is drained and the credit card is maxed out.
3. There is no tracking of credit cards or payments. Without awareness of purchases and payment due dates, the interest and late fees can quickly get out of hand.
4. They succumb to instant gratification on purchases. Having money and credit cards readily available makes it easy to buy whatever they like, whether it’s at a store, ordering food to be delivered, or making an online purchase. Many things can be delivered right to your doorstep within a matter of minutes…for a fee, of course. And those fees really add up!
5. They don’t invest – it’s not on their radar to do so. Of course, to be a successful investor, the most important thing to do is to save first and spend second. This has to be done from Day One. Otherwise, habits develop where everything gets spent and there’s never anything left over.
Literacy courses are great, but young people need to start off with a solid plan for their money, a really good budget, and always save first and spend second. Prioritizing needs first and taking care of wants later is important. So, if you’re going out into the world and managing your money for the first time, take this into consideration and avoid these common mistakes. Until next time, enjoy.
Gary
If you’d like to read more on this topic, here are a few of Gary’s previous posts that you might enjoy:
