MILWAUKEE -- Millions of college students will graduate this spring -- 70 percent of them with student loan dept looming. But getting a tassel doesn't have to be a financial hassle. Financial expert Nick Foulks with Drake & Associates joins Real Milwaukee with four money mistakes the class of 2017 needs to avoid.
MISTAKE #1 | DEFAULTING ON YOUR LOAN
- On average, 3,000 people a day defaulted on their federal student loans in 2016.
- Defaulting on a loan is when you don`t pay your loan payments for an extended amount of time, 270 days without a payment on a federal loan to be exact. In that time you are not only racking up late fees, you are putting off the inevitable.
- It puts your credit at risk and can potentially keep you from getting a mortgage, car loan or even a credit card.
- If you are having trouble making your standard federal loan payment, consider switching to an income-based payment. It may lower your monthly payment, making it more affordable.
- If possible, pay more than the amount due each month. The extra money will help cut down the principal balance.
MISTAKE #2 | NOT HAVING A BUDGET
- It's a lot easier to pay your loans on time and with the full payment each month when you have a budget.
- A budget will help you look at how much money you`re making and set aside enough for not only your student loans, but to cover your bills and save for short and long term goals.
- The goal is to have more money coming in than expenses going out.
MISTAKE #3 | IGNORING YOUR RETIREMENT
- A recent study shows that today`s college grads will likely be working until they are at least 75.
- Make sure you are taking advantage of an employer-sponsored 401(k) or start your own retirement account.
- You may think retirement is a long way away, but that`s why it`s important to start saving now.
- A good benchmark is to have one year of your annual salary saved by age 30, two times your annual salary by age 35 and eventually 10 times your annual salary by age 67.
MISTAKE #4 | NO MONEY IN THE BANK
- About 70 percent of millennials have less than $1,000 in their savings accounts.
- When you graduate and get a job, you will likely get a raise. You should be putting money from that 'raise' into your savings account.
- A good rule of thumb is the 80/20 rule. Use 80 percent for regular expenses. Then save the remaining 20 percent. Ten percent in your savings account and 10 percent for retirement.
- But in the long run anything, big or small, you can save is a step in the right direction.