Common Financial Mistakes That Young Professionals Make

Posted on Apr 23, 2014 | 0 comments

Getting your first full time job is an exciting experience, and it is easy to get carried away with the new freedom and excitement of having a large disposable income. It is common for young professionals to either waste that income or over-commit themselves to expensive purchases, missing out on the chance to make their money work for them, or, worse, ending up in debt because of simple financial mistakes.

The most common financial mistake that young professionals make is to fail to budget. You may feel like you have a lot of money, but that money can evaporate quickly when you start paying back student loans, paying your rent or mortgage and having to keep up with car payments and other expenses. Having a clear budget will enable you to keep better track of your income and outgoings so that you know for sure whether you can commit to those new purchases.

Another common financial mistake is to assume that your salary will increase soon. You should never include anticipated bonuses or pay increases in your budget. Instead, base your budget on your guaranteed take home pay, and treat bonuses as a nice extra rather than something you depend upon for your basic expenses. To do otherwise is stressful at best, and a way to end up deep in debt at worst.

Another major mistake made by young professionals is to fail to save. While you are young, unmarried and do not have dependents you should invest as much as you can into retirement funds, saving for you first property, and building up a rainy day fund. That does not mean that you cannot have some fun with your disposable income, but it is still a good idea to save. If you decide at a later date to take some time off work to go travelling, or if you lose your job or are unable to work for a while, that extra safety net will come in handy.

Being independent for the first time can be confusing, but there is a lot of support out there to help people find their way in the world of personal finance. Talk to an accountant, a representative of your bank, or a financial advisor to make sure that you start life on the right footing and will be financially secure for the rest of your life.

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