As any new grad will tell you, once you’re in the real world expenses can start to add up quickly. Most people right out of college don’t have much experience managing their own money and it shows in their spending patterns. We’ve compiled a list of 5 things that new grads waste their money on and tips for how to stop, without sacrificing too much in the way of quality of life.
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1. Credit Cards
It might seem tempting to never think about your budget and pay for everything on credit. But if you’re living paycheck to paycheck one of the best ways to manage your money is to keep track of your spending (by saving all your receipts or even creating a simple spreadsheet) and start paying with cash. Studies have shown that credit cards cause more spending so if you’re on a tight budget, switching to cash might actually save you money in the long run. It’s way more painful to shell out $100 in cash for a nice meal than it is to just put it on a credit card and forget about it for a month.
In college, free beer and entertainment are pretty ubiquitous. But there’s a seismic shift that occurs when you start working and have to start paying for expensive drinks at restaurants and bars. We’re not saying you should stay in every Friday and Saturday night to save money but consider frequenting bars and restaurants that offer reverse happy hours (10 pm – 2 am) or have friends over at your apartment for a drink and then go out to the bars. It might even be a good idea to go out with enough money for only two drinks since we all know how loose our credit cards can get by the end of the night.
3. Food & Groceries
Even though groceries are a necessity, that doesn’t mean you have to spend a ton of money on them. One of the biggest mistakes you can make is leaving your meal decisions to the last minute. Take a look at the online flyer for your grocery store and see what’s on sale before you decide what to cook. Most groceries have rotating categories that will go on sale so you should try and cook meals with chicken when chicken is on sale and steak when steaks are on sale. If that’s too much work for you though, you can always buy items when they’re on sale and freeze them. Food stays good for months at a time as long as it’s frozen and there’s no noticeable difference in taste.
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All too often we see new grads way to eager to go out and live by themselves. Living by yourself is more expensive than most realize though since there are so many shared costs that you now take full burden for. Utilities, internet and TV are the obvious ones but even buying things like toilet paper and paper towels becomes more expensive since you can’t buy in bulk anymore.
Try to keep your living expenses under 20-30% of your take home pay. A great way to do it is to add some roommates. Having lived in all different types of housing setups, I think three bedroom houses are right in the sweet spot. That way it won’t feel too crowded but you also get to reap the financial benefits of living with two roommates.
For most of us, our car is our way of life. If you live in a big city, maybe you take public transportation everywhere you go. Either way, transportation costs are expensive but they don’t have to be. Try to walk more and consider riding your bike everywhere you go. It’s not always feasible but for all those short trips to the grocery store or to a friend’s house, think about ditching the car. It’s great exercise and you won’t ever have to worry about parking when you walk or ride your bike somewhere.
If you’re lucky enough to land a job right out of college, the freedom to spend money on the things you want is nice. But remember, what’s important to you at the age of 23 though might be a lot different than what’s important later on in life. You don’t want to put yourself in debt right away by wasting money.
Related Article: 3 Bad Money Habits That Are Keeping You Broke
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