Reaching adulthood can be a financially challenging period. There’s just so much to think about- being independent, a significant degree, securing a job. It really does not come as a surprise that many 20-somethings end up making horrible decisions regarding their money.
Here are a few of the regrettable financial mistakes millennials make that drain their bank accounts and put them in a compromising position when money is concerned.
Not fixing a budget: Yes, coming up with a budget may sound restrictive and unnecessary; also it is not an easy task. But with a self- calculated budget, you can know your limits and pull yourself back whenever you are about to overspend in things you don’t really care about; ultimately helping you save the money for something more important.
A budget will always come in handy to help you differentiate between where to splurge—on quality over quantity, for instance—and where the best option is to economize, like buying a second hand car instead of a new one.
Splurging on unnecessary things: There are so many things we want, but we can’t have them all at once. Before convincing yourself to buy another unnecessary pair of shoes, take a moment to think if you actually need them. Don’t be carried away by your desires.
You can save up for some time and buy yourself something good once in a while-like the camera you’ve always wanted, but don’t spend all your savings on items you won’t even need- like a third pair of headphones just because they look cool. In a time of dire need, you’re surely going to regret letting your money go to waste.
Not having an emergency fund: It may feel like you will not need to save up for an emergency fund as you are still young and healthy, but the future has a reputation for being unpredictable. You never know what can happen and how your life can turn upside down. We all know it’s better to be safe than sorry.
A sudden crisis can leave you struggling without a safety net. Even something as minor as the sudden illness of your pet can turn into a big problem when you’re on a tight budget. So start contributing some money regularly to an emergency fund that will keep you afloat if an accident strikes.
Not coming up with financial goals: It’s always a good idea to have a plan about where you’d like to see yourself—in a year, in five years or in 20 years.
There’s no guarantee that the vision will come true, but it’ll make sure that you are on a path that’ll take you somewhere good. Your financial goals can be simple- like fixing your weekly savings, or it can be more illustrated, like your dream house. Start with small steps- set your goals.
Financial goals will help you with your budget as well, thus helping you to be careful about over-spending money.
Depending on credit cards too much: Credit cards can be a life-saver, but they can do some serious damage, thanks to the finance charges. If used carefully, credit cards can help keep track of your spending; but refrain from spending more than you actually have.
Paying off credit card bills regularly helps you remain within your budget limit and protects you from finance charges. It can also help you with great credit rating for the times when you actually need to borrow money.
Not taking debts seriously: Maybe you have a large student loan that you think you can pay later, or something similar. Thinking that you have a lot of time and procrastinating on paying it back will only make the interests rise higher.
It’s better to pay off your loans in many small installments than handling an insane burden of loan at once. Taking your debts for granted can have severe repercussions. Try to fit the loan payments in your budget, if necessary cut off a few more expanses that you could easily do without.
Trying hard to maintain the status quo: Maintaining a social image, a status quo has become so important nowadays that we sometimes overextend our limits. It’s natural that your first “real” job probably won’t pay as much as you wanted and having a large house, expensive cars or a lavish wardrobe won’t be a financial possibility for you at such an early stage of your career.
Chasing these luxuries, not knowing your limits and trying to impress others or showing off could push you further into debts and make your dreams even harder to achieve.
Finances are supposed to be demanding in your 20s and they sometimes can seem to be completely out of your control. But it’s really important to prioritize financial stability.
These mistakes can easily be avoided if you are careful and meticulous enough, and you’ll be on your road to financial security.