Many college graduates fail to understand finances as well as they should. Very few take a significant amount of financial courses while they are in college and teachers do not focus on teaching financial management in high school. This leaves recent graduates at a disadvantage when they enter the world outside of college and must fend for themselves financially. Here are some of the most common financial mistakes that new graduates make.
Failing To Obtain A Credit Card
Many recent graduates are wary of getting a credit card, and rightly so. Having a credit card can be a great temptation to spend more than you can afford and is one of the highest priced types of credit to have. Unfortunately, a credit card is one of the best ways to show financial responsibility to creditors and many types of transactions cannot be performed without a credit card, such as renting a car or purchasing plane tickets online. It is important to obtain a credit card with a reasonable credit limit and a low interest rate and demonstrate that you can use this credit card responsibly to build credit for the future.
Maxing Out A Credit Card
Maxing out your credit card is a quick way to get yourself into financial trouble. If any hiccups happen with your finances, you may not be able to pay the minimum payment, which will severely damage your credit score. If you do not have credit available on your card, you may not be able to handle any unexpected financial expenses that may arise. The best way to use a credit card is only charge what you can afford to pay each month. If you must make a purchase that is larger than that, make a plan to pay off the credit card within a few months and stop spending with the card until that balance has been eliminated.