In 2017, I made two mistakes:

1. I assumed I didn’t know how to manage money because I didn’t study finance or accounting and that the ship had sailed.
2. I figured I didn’t earn enough for investing to “work,” so it wasn’t worth it.

Here’s the bewildering part: 

I calculated recently that the contributions I made in those early years (2018 & 2019) when I was earning less than $65,000 will account for a whopping $875,000 of my final portfolio value in 30 years.* (More on that below.)

These automations completely changed the game for me: 

1️⃣ My 401(k) contributions were already automatic, so that was an easy win. I was contributing around $600 per month, and my employer was putting in $500.

2️⃣ I opened my Roth IRA with Betterment, and then I did the crucial step: Set up automatic transfers for *1 day after each pay day* for $250. 

I did that for a little bit until I got comfortable with it, and then once I saw how I didn’t miss that money when it wasn’t there to begin with, 3️⃣ I set up a similar automatic transfer into a new taxable brokerage account for *2 days after each pay day.*

Every time I’d get a small merit increase at work or pick up an extra class at the studio, I’d log in and see if I could bump up an automatic transfer by $20 or $30.

👉🏼 And then we were off to the races — but I narrowly avoided the mistake that’s SO EASY to make: I assumed that I’d know how to manage money once I earned more of it. 

Money management is a language you can learn, and it takes time to get comfortable — the more you “speak it,” the better it gets!

*Assuming an average annualized return of 7%.

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LEARN MORE ABOUT: IRA Accounts

TRANSFER IRA TO GOLD: Gold IRA Account

TRANSFER IRA TO SILVER: Silver IRA Account

REVEALED: Best Gold Backed IRA

In part one of this series, we discussed the difficulties of shifting our money mindset after college. This included dealing with limited resources, new financial responsibilities, and learning how to manage our money independently. In part two, we explore the harder, more ingrained behaviors that often plague recent graduates.

We are conditioned to spend

For most of us, spending money has always been associated with pleasure and fulfillment. We grow up constantly bombarded by ads telling us to buy things to make us happy, or that they will solve a problem we didn’t know needed fixing. So it’s no surprise that we continue this behavior into adulthood, spending without thinking twice about the long-term impact.

Now, however, we must reconcile this behavior with our new financial reality. Most recent graduates don’t have access to large sums of money and must learn how to make smarter choices when it comes to spending. This change can be challenging, especially when it involves saying “no” to things we think we want and need.

We’re fearful of missing out

Another reason we struggle to shift our money mindset is fear. Specifically, the fear of missing out on experiences and opportunities due to financial constraints. We’re so worried about missing out on life’s pleasures that we’ll often overspend to make us feel like we’re a part of something.

This can lead to reckless spending habits that have long-term consequences. By overextending ourselves, we’re more likely to be stressed, anxious, and in debt. Learning to prioritize our spending and evaluate what’s really valuable to us can help us overcome this fear and avoid making poor decisions with our finances.

We don’t know how to save

Saving money is critical to our long-term financial health, but this is not a skill that most of us are taught in college. We may know how to create a budget or pay bills, but the concept of setting money aside for the future is often overlooked.

Without proper education and practice, saving seems nearly impossible. Where do we start? How much is enough to save? How do we balance saving with our other financial commitments? These are all questions that can be overwhelming, but with time and dedication, we can learn how to save effectively.

Conclusion

All of these behaviors can make it challenging to shift our money mindset after college. However, the key is to be patient with ourselves and understand that any change takes time. We must break the ingrained habits we’ve developed over the years, and that can be difficult.

By focusing on our financial goals, prioritizing our spending, and educating ourselves on proper financial management, we can gradually alter our mindset. With time and determination, we can learn how to thrive in today’s financial landscape and build a successful financial future.