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So, you managed to finish college and now, after a summer of relaxation, it’s off to your first job.
As you commence your new life as a working professional, here are three common money mistakes to avoid:
Getting scammed on an apartment and losing your stuff.
Dylan Young, a recent graduate of the University of Michigan, said he made a smooth transition to his first job in Salt Lake City, in part because he started searching for affordable apartments a couple of months in advance and shopped around until he found the best fit.
“I started looking on apartment listing websites and called a bunch of different places. Some wanted ridiculous deposits,” he said. “Then I found a one bed, one bath unit in a brand-new building, and only needed one month of rent for a deposit.”
Young was lucky. Rental scams abound, including hijacked listings that are copied from real landlords. The classic red flag of an apartment rental scam: A “landlord” who needs you to wire money to secure a hot apartment before it disappears.
How to avoid it? Reach out to your school’s alumni network. There may be email listservs or social media groups that can help with good housing deals.
Once you find your dream apartment, you’ll need renter’s insurance, and, depending on where you’ll be living, flood insurance. Contrary to what some may think, your landlord’s insurance policy for the building will not replace your personal possessions or cover your living expenses in the event of a catastrophe.
There are two main types of renter’s insurance: Actual cash value and replacement cost. The former pays to replace your possessions minus depreciation. The latter pays the actual cost of replacing your possessions with no deduction for depreciation.
The Insurance Information Institute recommends getting at least three price quotes. You can save money by agreeing to a higher deductible of $500 to $1,000; doing that can save you as much as 25 percent on your monthly premium. Another way you can save money is by bundling your renter’s policy with your car insurance.
Getting caught in alumni bank account limbo.
Be sure to find out how and when your bank account policies will change. Some accounts automatically convert to standard checking accounts and may introduce various fees or penalties if your balance dips too low. You might be able to avoid this by choosing to direct deposit your paychecks, so ask your bank about this.
With the growth of personal finance websites and apps such as Mint, Level Money and Goodbudget, there’s no shortage of resources to help millennials budget responsibly. Young says that’s been the key to living on his own.
“Financial budgeting is the biggest thing,” he says. “You’re very financially tied to your family in school, but in the real world, it’s your paycheck. It goes into your account, and if you want to blow that all at once, no one’s going to stop you.”
Losing money on a car.
A first job in a new city may mean getting some wheels. And for many millennials, that means buying a used car.
“The key is finding out as much about the history of the car as you can,” Gillis says. “That’s why buying from somebody you know can be a great way to get a good vehicle, and if you’re moving to a new town, putting the word out among professional colleagues and friends that you’re in the market for a used car is a great first step.”But even if you buy a used car in a private sale from a friend, Gillis says you should always invest the extra $50 to $75 to have it inspected by trusted mechanic before you sign.
“There are certain things that a mechanic can uncover, such as flood damage or rolled-back odometers,” he says. “Those are good reasons to stay away.”
Worn brakes or old tires aren’t a deal-killer, but they could give you information to negotiate a better price. And be sure the vehicle you’re considering hasn’t been involved in any recalls by entering the VIN on safercar.gov to check the recall history.
The last piece of advice is more psychological than practical.
“The hardest thing for most folks to do is to not fall in love with any particular car,” Gillis says. “A lot of people fall in love with a particular car and end up making a bad choice either because the car doesn’t meet their needs or because it’s mechanically problematic. If you fall in love, you lose the psychological ability to walk away from a bad deal.”