When you’re just starting out in the real world, everyone’s got advice, especially about how to manage your money. But certain bits of financial “wisdom” can fall short. Check out these four young money myths.
Best to Get Your Own Place
College graduates are encouraged to live on their own. After all, it’s a right of passage to adulthood. But remaining at home with your parents — even for just a year or two — can sometimes offer a bigger jumpstart on life.
According to a recent poll by the Pew Research Council, more than 21 million young adults lived with their parents in 2012 to save money. The math is pretty convincing: Figure you might spend 30% of your take-home pay toward your own place. Considering the average income for a recent grad is around $45,000, opting to live with mom and dad could save you, after taxes, roughly $10,000 a year on housing, alone.
Also see: Life in a 190 Square Foot Apartment
Thirty-two-year-old David Weliver knows the benefits of this all too well. When he turned 26 he moved back in with his parents to help pay off $80,000 in debt stemming from student loans and living beyond his means.
“Nobody wants to live with their parents when they’re in their 20s, but in hindsight I really regret not staying there longer. I would have saved $500 to $1,000 a month in rent,” says Weliver. “It would have let me get out of debt much faster.”
Weliver now runs his own financial blog, MoneyUnder30, documenting some of the financial lessons he wish he’d learned in his 20s and other money myths you often hear when you’re first starting out in the real world.
Also see: 3 Top Financial #Fails
Save, Save, Save!
While it’s important to take advantage of socking away money when you’re young, don’t forget to enjoy it from time to time. For Weliver, a once-in-a-lifetime vacation is a valuable investment he wishes he’d pursued more in the past when he had more time.
“Even if you have to stretch a little bit to do it, travel when you’re young, because it gets so much harder as your career responsibilities increase and you have a family. You just don’t have time to do it," says Weliver.
Grad School Is Worth It
As a young professional you may be encouraged to go to graduate school. But in some cases, the benefits may be yet another money myth, especially if you need to take out large loans to attend. Those loans could end up haunting you for years to come in a tough job market. Take law school: In 2012 graduates owed over $100,000 in loans, according to U.S. News & World Report, and many have been unable to find high-paying jobs.
Also see: How to Write the Perfect Scholarship Essay
Just Be Happy to Land a Job
Finally, don’t sell yourself short in the job market. Ignore the advice that you should just be concerned with landing a job and asking for a raise later. "Too many people don’t negotiate their starting salary, which is too bad because most raises are based on a percentage of your starting pay," says Weliver. "Most employers aren’t going to take back a job offer if you ask for more money. The worst they’ll say is no.”
What are some financial myths you often hear in your 20s? Connect with me on Twitter @Farnoosh and use the hashtag #FinFit.