Whether you're finishing school with an undergraduate or a graduate degree, you might be excited to leave the books and classroom behind you. Maybe you've started interviewing for jobs and you're looking to become more independent. But unfortunately, you might acquire too much too soon and find yourself in financial hot water. Here are seven post-grad money mistakes to avoid.
1. Student Loan Deferment
If you have a federal student loan, repayment doesn't begin until 6 to 9 months after graduation. There's also the option of putting off student loan repayments for several years. However, interest may accrue during the years you're not paying on your student loan. By the time you start repaying the loan, you might owe thousands more than your original balance. Forbearance is helpful when you can't make student loan payments, but if you have the resources, start repayment as soon as possible to avoid increasing your balance.
2. Not Looking into Loan Forgiveness
If you work in public service, such as a teacher, a police officer, a military serviceperson or certain health clinics (to name a few), you might qualify for student loan deferment after 120 months of timely payments. Not everyone qualifies, so you'll need to ask your student loan provider about eligibility.
3. Moving out Early
You might be eager to move out of your parents' house and start your life as an independent adult. But if you move out too soon, you could complicate your personal finances. Chances are an entry-level job may not provide enough income to live on your own. It really depends on where you live and the cost-of-living in your area. Not that you shouldn't move out, but give yourself time to adjust to your new income.
4. Not Saving Money
Staying home with your parents for a little bit can be financially beneficial. Once you move out and start acquiring monthly bills, it'll be harder to save and pay off debt. But if you stay home for a year or two after graduating, you can pay off credit card debt, pay down your student loan and even build a savings account, which can provide the money you need to buy your own place.
5. Ignoring Health Insurance
Yes, health insurance is costly, and if you're relatively healthy you might feel you can go without coverage. But even if you can't afford the best health insurance, some coverage is better than none. It only takes one health catastrophe to wipe out your savings account or leave you with a mountain of medical debt you can't pay. Medical debt can hit your credit report and lower your credit score, and when this happens, it becomes much harder to get mortgages, auto loans and other types of financing.
6. Not Getting a Jumpstart on Retirement Planning
As soon as you're eligible to enroll in your employer's 401(k) plan, join and start planning for retirement. So what if you're in your early 20s and won't retire anytime soon. The sooner you start putting money aside, the more income you'll have when you're ready to retire. This can be the difference between maintaining your lifestyle and having to downsize after you retire. And since you have few responsibilities as a young adult, you can contribute more to your 401(k) plan in the beginning of you career. If your job doesn't offer a retirement plan, open an IRA with a local bank.
7. Jumping into a Mortgage or Car Payment Too Soon
Now that you're getting a real paycheck you might be eager to buy a house or get an expensive car. But before you make these moves, make sure you're saving money and taking care of priority expenses, such as purchasing health insurance.
Understandably, you're ready to move forward with your life, but this isn't an excuse to make mistakes that can set you back financially. What are other post-grad money mistakes to avoid?