Common Money Mistakes Of Young People
• Leaving beyond your means/Keeping up with the Joneses. A lot of young people are keeping up with the joneses what they fail to realize is that the Joneses are broke. Social media does not make it any easier. People are constantly showing off and trying to outdo each other. Young women are buying expensive bags, hair and shoes that they cannot afford. Young men are buying engagement rings that they can’t afford. Most couples and their parents find themselves in debt after lavish weddings that they can’t afford. The key phrase here is they can’t afford .
• Not understanding debt: Good debt versus bad debt. Young people do not realize that there is bad debt and there is good debt. It is not advisable to purchase a car via a loan due to the fact that a car is not regarded as an asset. Once you drive out of the car store, the value of the car depreciates. Also credit cards accrue the highest rate of interest and should be avoided as much as possible. It is reasonable to borrow money to further your education or buy a home. Debt should be avoided as much as possible.
• Deals & Discounts – bargain hunting. Young people do not take advantage of bargains or discounts. A lot of money can be saved through deals or discounts.
• Lack of budgeting: A lot of young people do not live on a budget. Most people don’t know how to budget. A budget is a blue print for achieving specific goals. In simple terms, it is a list of your likely income and expenses for a given period. Kindly check my blog for articles on budgeting.
• Do not have an emergency fund: A lot of people do not have emergency funds. An emergency fund is an account that is used to set aside funds to be used in an emergency, such as a loss of a job, an illness or a major expense. Typically financial planners recommend that your emergency fund should be able to cover at least 3-6 months of living expenses. A vital point is that an emergency fund reduces the need to use high interest debt, such as credit cards as a last resort. Life happens it is better to be prepared than to be sorry. The truth is that everyone has an emergency fund; the difference is that you are either earning interest or paying interest.
• Do not understand that it is the little things cause the biggest problems: People fail to realize that it is the little things that often cause the biggest problems. Eating out once in a while may not cause a dent in your finances, however, eating-out every day, throughout the year, may prevent you from potential earnings from savings as a result of eating at home.
• Misconception that you need to earn a lot of money before investing or saving. A lot of people fail to make investments or save because they feel they don’t earn enough or don’t have enough. What they don’t realize is that it is best to start small, start early but most importantly start now. There would never be a better time to invest or save.
By Omilola Oshikoya