Money management is a Herculean task to me even after reading 100 articles on money saving tips in the last 5 years. No matter how hard I work, how much money I make, it isn’t enough to fulfill my basic needs. It’s quite possible that I’m making money mistakes without even realizing it. Sometimes, I feel ashamed of myself. But it’s okay. We all make mistakes. We all have a few bad financial habits like I can’t control myself when it comes to grocery shopping. I don’t think about budget when it comes to expensive spices, sauces, cheese, fish, or oils. My immense love for cooking has to be blamed for this.
Money management is an important part of our life. It’s like food. You can’t live without it. Many of us try to be on top of our finances. A lot of us fail miserably. Some manage to get a grip on money management whereas others excel at it. If you want to have financial independence, then it’s important to avoid making money mistakes millennials are making.
I have compiled a list of money mistakes millennials often make. Let’s know what they are.
1. Spending more than what you earn
Living above your means is a big financial mistake. It leads to debt problems.
You can live beyond your means with credit cards. You can spend more than you earn. But in that case, you should also be prepared to face the consequences. Your life will be filled with money worries. You can’t sleep properly. You can’t save money.
Living within your means is the best way to save money. You can plan your future. You can buy what your heart desires on the basis of your affordability. You can build credit. Most importantly, you can have mental peace in your financial life.
2. Not checking credit report once in 6 months
You’re courting danger by not checking your credit report periodically. You have read everywhere that one should check credit report once in 6 months. There is a logic behind this. Regular credit report review helps you spot identity-theft and credit card scam issues. You can know if there are any dispute errors.
A credit report is your financial report. It gives you an idea of how good you’re at money management. It tells you where to save money. If you detect that there are many unpaid collection accounts, then you can settle them and save money. If there is a case of identity-theft, you can report to police and prevent yourself from paying fines and penalties.
3. Purchasing a home
It’s the ultimate American dream. Isn’t it? Nothing can beat the feeling of owning a huge apartment or a house. But is it worth it? Not financially.
Renting a home is a feasible option nowadays. Most millennials don’t think like that. I know. But think logically. You can live in the most beautiful apartments in your lifetime without spending a fortune. Moreover, you can avoid a mortgage, property taxes, private mortgage insurance, large down payments, maintenance cost, etc.
4. Not having a talk about money with your spouse
It feels awkward to talk about money management with your partner in the early stages of a relationship. If it’s just a fling, there is no need to have a ‘money talk’ with your spouse. If you’re serious about your relationship, then it’s important to know about each other’s financial priorities. Talk about your likes and dislikes. Discuss your expectations regarding expenses and future planning. Don’t show your bank account statements but talk about annual income and debts.
It’s important to be on the same financial page or your marriage may suffer in the long run.
5. Ignoring your budget purposely
Love it or hate it, you can’t ignore your budget. A lot of millennials relate budget with deprivation. They break their budget in the festive season and many other occasions - a big money management mistake. The budget gives you a spending map. If you ignore it, you’ll be doomed. You’ll be in a big financial trouble. Your credit card debt will increase gradually. Your credit score will drop. You’ll face problems in obtaining loans at the best terms and conditions.
I keep saying that life is like a roller-coaster. Sometimes, it’s up, up and up. Sometimes, it takes you down. I would suggest you to read as many articles possible on how to save money and common money management mistakes. Use the money saving ideas to grow your ‘money tree’. Here, I’m referring to an emergency fund. You can use it when someone you love is in a situation where he/she needs extra money. You can opt for automatic transfer to build your emergency fund. Initially, you may feel it’s a waste of time and money. But when you face a financial debacle, you’ll realize what I’m saying.