Landing a job right out of college is no easy feat, especially considering how tough the job market can be. Once you lock in a position, your main focus is likely to be on learning the ropes at your new company. But that’s not the only thing you need to pay attention to. As you gear up to head into the workforce for the first time, here are three financial mistakes to avoid.
Find out now: How much should I save for retirement?
1. Skipping Your Employer’s 401(k)
In 2014, 74% of full-time employees in the private sector had access to a retirement plan through their job, but not all of them took advantage of it. According to the Bureau of Labor Statistics, less than half of workers who were eligible to participate in a plan actually did.
So why aren’t people saving? For many 20-somethings, the burden of student loan debt is a barrier to building a nest egg. In an effort to get rid of the debt faster, it’s tempting to forgo retirement plan contributions altogether. But failing to enroll in a plan can cost you in the future.
Consider this example. Let’s say you have $30,000 in loans at a rate of 6%. On the standard 10-year repayment plan, your payments could come to about $333 a month and the interest could cost you close to $10,000. Paying an extra $100 a month could shave about two years and $3,000 in interest off the loan.
If you took that same $100 and parked it in your 401(k), it could be worth almost $30,000 by age 66 when assuming a 7% annual return. Even if you paid the full interest amount on your loans, you could still come out ahead by investing in your 401(k) versus wiping out the debt faster.
Check out our student loan calculator.
2. Not Saving Enough to Get the Match
Simply enrolling in your employer’s 401(k) isn’t enough if you’re trying to maximize your savings. It’s also important to make sure you’re putting in enough money to qualify for the full matching contribution if one is available. Sometimes employers match a certain percentage of what you put in, but the terms can vary from plan to plan.
When you’re just starting out and you’re not making a lot, coming up with the extra money to qualify for the match can be tough, but it can be worth it if it’ll allow you to save up even more money for retirement.
Check out our 401(k) calculator.
3. Thinking You Can’t Negotiate Your Salary
One of the biggest misconceptions new grads have when looking for their first job is that they have to take the first salary offer that comes along. After all, employers are going to want to give a bigger paycheck to someone who has years of experience under their belt, right?
Not necessarily. If you bring something to the table that makes you a strong candidate – such as extensive volunteer experience or highly specialized skills – don’t be afraid to leverage it. It’s a good idea to take a look at what similar jobs are paying and use that as a starting point for requesting a higher salary. It helps to be prepared to explain why you deserve more money and have examples to back it up.
You might also want to review the benefits package as a whole to see what kind of perks are being offered. If you’re hitting a dead end when it comes to your base pay, there may still be some wiggle room when it comes to negotiating things like vacation time. The more confident you are in your approach, the greater the chances can be that you’ll get what you want.
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