“Ask Brianna” is a column from NerdWallet for 20-somethings or anyone else starting out. I’m here to help you manage your money, find a job and pay off student loans — all the real-world stuff no one taught us how to do in college. Send your questions about postgrad life to firstname.lastname@example.org.
You’re not supposed to know everything. Those of us who survived our 20s tend to forget that when we’re anxiously peddling advice to young adults. Growing up is mostly about learning, and, yes, sometimes making mistakes along the way.
It’s good to be aware of some of the more egregious errors, though — especially in an area like finance, where a few solid habits and strategies will pay off again and again. These are the five most common mistakes 20-somethings make; post them on your fridge and do your best to sidestep them.
1. Ignoring your financial flow
At your first job, and whenever you get a new one, it will take a few paychecks to notice how much money actually hits your bank account after taxes and deductions like health insurance. And your earnings can easily evaporate if you don’t pay attention.
“It’s not what you make; it’s what you get to keep that counts,” says John Gajkowski, co-founder of Money Managers Financial Group in Oak Brook, Illinois.
Use a budgeting app or choose one way to make all your purchases — a debit card or a credit card that you pay off each month — so you can easily track spending. Say you notice you’re really going to town on Lyft and Uber. Designate one weekend a month when you can hail a cab to your heart’s content, and use public transportation or other means the rest of the time.
2. Letting friends set the agenda
You’ll need serious willpower to avoid trying to keep up with friends who make more money than you, and who want to go out for drinks or dinner at places you can’t afford. When you make plans, get in the habit of being the one to suggest where you’ll meet, and be honest; a brief “I’m on a budget, so let’s check out that free Friday night event at the museum” will suffice.
3. Not realizing time is on your side — to save
Yes, you will probably make more money in the future. That doesn’t mean you should wait until then to save in your company’s 401(k). Do it now and you’ll build a habit; wait too long and saving will feel like cutting back.
“It’s a lot easier to start right at the beginning, because it only hurts for the first couple of weeks, and then you’re used to it,” Gajkowski says.
You’ll be richer if you start now. Save $200 a month starting at age 23, and at a 6% rate of return you could have about $425,000 at 65; start at 33 and you’d have about half that.
4. Jumping on quick student loan fixes
In the first quarter of this year, 2.6 million federal student loan borrowers paused their monthly payments through forbearance, according to government data.
In forbearance, payments are halted, but interest accrues. You’re in the hole a little deeper every day. That’s why it should be a last-ditch option for borrowers who’ve hit rough times.
Instead, ask your student loan servicer if you qualify for deferment first, since subsidized federal loans won’t accrue interest in the meantime. If not, in most cases, opt for an income-driven repayment plan, says Kevin Fudge, director of consumer advocacy at the nonprofit research and counseling organization American Student Assistance. Your bill will be in proportion to your income, and if you need a lower payment indefinitely, your balance will be forgiven after 20 or 25 years.
5. Digging deeper into debt for grad school
Going to graduate school is more and more common: In 2015, 12% of adults age 25 and older had a graduate degree, compared with 8% in 1995, according to the Urban Institute. But grad school is not always a sure way to have more financial flexibility in the future, especially if you need to take out more loans to go.
Exhaust other ways to pay first, like attending part time and taking advantage of tuition assistance from work. Adding to existing student loan debt isn’t something you should do lightly; use a student loan calculator to see what you’ll pay after you’re settled in your shiny new job after graduation. It may shock you.
This article was written by NerdWallet and was originally published by The Associated Press.