The College Student's Guide to a Financial Death Sentence: Avoid Getting Caught In These Financial Traps

Tentatively taking their first wobbly steps into the real world, hoards of recent college graduates are being thrust, head-over-heads, into falsely superficial, financial traps far too soon in the game and must, in order to survive, adapt and dig themselves out of a boatload of accidental, idiotic debt, only to emerge months to years later with a poor credit score. To completely avoid such a situation, here is a list of the common financial mistakes that recent college graduates tend to make. Learn from them, pass them on, and spread the message. Don't allow yourself to be a statistic.

Gross Salary - Tax Deductions

The figure that your company offered to pay you on your first job is a gross, yearly salary figure. By "gross," I mean that it is how much you'll be earning without any tax deductions. Do not get ahead of yourself and plan out your life based on this gross figure as you'll find yourself financially strapped after only a couple of months (since you're technically overspending every month & thus, living beyond your means). The amount of money that is taken out of your paycheck varies, but on average you'll see deductions for: federal withholding, social security, medicare and state taxes. It may not seem like a lot of categories, but in the grand scheme of things, chances are you'll see a good chunk of your gross salary reduced. The money that you will receive after the deductions will be your "net pay" and it would be best to plan your financial roadmap around this figure (after putting aside a certain small % for a rainy day) that is.

Expensive Rent

After being cramped up in a closet-sized dorm for a good couple of years, many college graduates make the mistake of renting out an oversized, expensive apartment the moment they land their first job. The liberation, freedom, and excitement of owning a nice place tends to wear off rather quickly once their financial situation starts to sink in. With how much they're making, coupled with their super expensive rent, chances are these college graduates only barely breaking even and/or am losing money every month. Due to the fact that most apartments require a 1 year lease, it can potentially be extremely expensive to liberate yourself from your lease. Most real estate management companies will charge you 2x your original rent to break your lease OR will hold you accountable for the whole 1 year lease even if you give them a 30-day-notice and move out. Even if you are lucky enough to have the funds to get out of this situation in one piece, you will most likely be completely wiped out financially (or at least close) afterwards. If you're not so lucky, you will probably have to deal with a collection agency, ruin your credit and rental history, and ultimately create more roadblocks for yourself in the future.

Rental Insurance

The harsh reality is that, as a new, entry level hire, you have next to no job security. If the economy goes down again, you will undoubtedly be one of the first people who's jobs are cut. While this isn't 100% true in all cases, it is the norm so it's best to prepare for the worst. Save some money, put it away in a bank account so that, if you are fired for any reason, you'll have a couple of months of buffer money to survive on. This will decrease the stress and anxiety that you will undoubtedly face if you are ever laid off. It is also ideal to get rental insurance as many companies nowadays have an additional subcategory for unemployment insurance, being that if you are fired, the insurance company will pay $500-$1,000 of your rent per month for 3 months. This insurance costs less than $100, but will be a tremendous asset if you find yourself struggling financially.

Hope this helps!