We all make mistakes when it comes to money but it’s the young people who have more difficulties due to inexperience. It could be that they just graduated, moving out on their own, or just getting their career started that makes it difficult to keep track of personal finances.
If you want to be financially secure, it is important to be on top of your finances as early as possible. Young adults nowadays make money mistakes that results in debt and financial instability in the future just because of lack of knowledge. So here’s several money mistakes and what you need to know to be smarter when it comes to your money management skills:
Spending based on emotions.
A lot of young individuals spend too much money just because it makes them feel temporarily good. Have a bad day? Go retail shopping to feel better. Something good happened? You deserve to treat yourself. This type of mindset should be avoided at all cost as mixing money and your feelings is never a good combination. Avoid shopping and think things thoroughly – the temporary fix will soon be gone but if you save up, you’ll be happier and more secure in the long run.
Not having a budget and emergency funds.
Do you have financial goals you’d want to reach? Having a budget is the key to achieving that. The way you spend your money can take you a step closer to your dreams or it can drown you further in debt. Emergency funds can also be a huge help if something unexpected happens later on – when you’re in your twenties you might be thinking that having just enough cash in your account to pay for rent, food, bills and entertainment may be enough, but it isn’t. Build at least 6 months worth of your monthly income as a safety net, just in case. If ever that there won’t be an emergency, you’d still have some extra cash if you’ll decide to make a big purchase later on.
Putting off investing.
Investments may sound boring but it can benefit your finances a lot. You can make your money grow that can change your financial status significantly.
Misusing credit cards.
Credit cards are often misunderstood by young people. Whatever purchase you make using plastic, has an impact on your finances whether good or bad. It isn’t magic money and it’s best to research and find out which credit cards has the best rewards programs so that you will also be financially responsible whenever you decide to swipe on your next purchase.
Failing to realize how small purchases add up.
It’s called “the latte factor” which could seriously hamper your finances if you do it on a regular basis. Just imagine on how much you can save, pay off your debt or even set aside for your retirement on those little items you buy on a daily basis like your regular cup of coffee or a pack of cigarettes.
Do you have any additional tips you’d like to share with the younger people when it comes to managing their finances properly?