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September 15th, 2020

What not to do with your Money as a Recent Grad

Graduating college and getting your first post-grad job is very exciting for everyone.  However, this newfound level of autonomy and source of income may be giving you an illusion of security. 

It is still important to balance celebrating this stage in your life without completely blowing your paychecks on discretionary activities like bottomless mimosa brunches every Sunday. 

This does not mean you cannot or should not ever enjoy a nice dinner out or a fun vacation. What it does mean is you should find a good balance of living in the present by planning for the future.  In your 20s, you are best suited to take advantage of the power of compound interest by saving and investing on a consistent monthly basis. 

In order to live a balanced life, having a budget will be very helpful. The occasional splurge is completely fine, but you need to have boundaries. Be sure to focus on the necessary expenses such as paying off debt, food, and transportation. As much as we may love taking uber everywhere we go or a fancy gym membership, these types of items will be the first to go if needed. 

How you use your money matters, as not everything you buy has the same value. Appreciating assets such as stocks, bonds, and residential real estate investments have consistently demonstrated the ability to grow over time. You should invest not only in these assets, but in yourself as well. As you increase your expertise in your field through professional designations and degrees, you can become qualified for faster promotions and higher pay. 

Some items you invest in will be depreciating assets, such as a car that loses value the second you drive off of the lot. Of course you need a car for daily life, but this may not be where you want to place a significant amount of your savings. 

Lastly, there are those expenses where the cash leaves your wallet and never comes back. These are usually the activities and items we love, such as a trip to Cabo, a good dinner, or the newest iPhone. While these items can provide a necessary outlet for enjoyment, keep in mind that once this money is spent, it is gone for good.

Appreciating assets, depreciating assets, and expenses are all going to be a part of your spending, it is up to you to keep track of them and continue to live within your means. The important thing to remember is a balanced life is the healthiest and happiest life. There is no need to deny yourself from the pleasures of life, but it is important to recognize the difference between your needs and wants. The best part is, if you focus enough on saving just a little here and there, you will be able to accumulate long-term wealth and eventually be in a much better place to enjoy the finer things in life, stress free!

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