Entering the real world is exciting. For young professionals this often means getting your first career-track job, moving into your own place and taking full control of your finances. While everyone wants to get started on the right foot, there are some common mistakes young professionals make that can have long-lasting impact.
1. Figuring It Out Later
This is a time in your life when you may find yourself making many big decisions in a small amount of time. Don’t say yes and figure it out later. Before you sign a lease or mortgage, determine whether you can afford it. The easiest way to do this is to create a budget. You may think you need to wait a while until your expenses "normalize" since when you first move into a place, there can be one-time costs like furniture and security deposits. But if you wait a few months, you may find yourself already in some serious debt.
Do some research and make a budget immediately. Then adjust your budget when you see how much money you are bringing home and how much you are really spending. It’s best to start out tracking your spending right away, instead of playing catch-up later.
2. Assuming You Will Make More
You may be disappointed by your first salary. You may work in an industry where big bonuses are normal. Regardless, plan your finances around the salary you are guaranteed right now. This gives you the freedom to make choices in the future.
If you are living beyond your means now, that raise or bonus will only go to paying off debts. If you budget for your current salary, you can use that raise or bonus to boost your emergency fund, increase your retirement savings, or treat yourself. Don’t spend your future self into a corner.
3. Not Asking Questions
Young professionals are covering a lot of new territory -- making decisions we haven’t made before. Don’t be afraid to do some research or ask for help. Read the fine print before you sign documents and if you don’t understand something, stop. Before you accept a job, sign a lease or accept a credit card, ask a few questions. Being financially independent doesn’t mean you have to be totally alone in the decision-making process. There are others who have done these things before, so seek out a mentor to help guide you through the process. There’s nothing more grown up than knowing when you need help.
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