3 Crucial Money Mistakes Millennials Must Avoid
The thing about the way some young adults spend money these days has most of the older generation scratching their heads and calling them “Generation Broke” on account of stories where these young adults spend their paychecks on experiences, on more intangible things than they did at that age.
To make that sweeping generalization of millennials is unfair, but not always untrue. While it is true that some are unable to manage their finances properly in the name of enjoying life, there are also those who’ve made financial decisions with maturity far beyond their two decades of life.
Still, there are money mistakes millennials should avoid, and here’s a look at some of them.
1. Letting your wants override your needs
It’s a mistake to let your wants be the center of your paycheck – a double whammy of spending when combined with a credit card.
Being able to differentiate between your wants and needs as an adult means being able to divert your finances towards the latter. It also means having the self-control to stop yourself from going for the things you want every time your paycheck comes in.
You fall into the trap of lifestyle inflation, all because something is new and shiny and everyone has it. You know you don’t need the latest iteration of a device when you still have a perfectly serviceable one sitting on your desk.
2. Getting a credit card
This should probably be suffixed with “before you’re financially ready for it”, because the truth of the matter is that a credit card is a great tool to have when you and your wallet are in a good place.
Why? Because having a credit card is a large financial responsibility on its own. You’ll be saddling yourself with thousands of Pesos in debt if you aren’t careful. The thing about credit cards that can wound your finances heavily is the interest on the amount you charge onto it.
Say the amount charged to your card is around Php 500 – at an interest of 2.5 every month, if left alone for six months, you’ll end up having to shell out Php 7,500 for an amount so small. It’s ideal to not get a credit card until you’ve got enough disposable income to weather being unable to pay on time.
3. Being unable to budget your cash
Having a budget structures spending, it could even allow you a way to get a few wants while being able to save up for the future. As daunting a concept as it might be, budgeting is one of the practical things that your parents have probably tried to instill in you. Now’s a good a time as any to lend them an ear and ensure that you’re not living paycheck to paycheck.
You probably have friends who track their spending via excel spreadsheets, little black notebooks, or a complicated mass of notes and strings. It’s frightening how organized they are, but there are ways you can work around your budget: smartphone apps. There are apps that let you know exactly what you need to do based on the amounts and goals you give it. Less frightening, and within reach whenever you feel the need to impulse buy.
The most important thing to note is that you are not the stereotype that most people will portray. Some of it might be true, but then there are also people older than you who’ve made worse money mistakes. The comparisons are often unfair and are byproducts of the generation gap.
What matters is that you learn from any money mistakes you might make, and do better for yourself each time your paycheck lands in your bank account.
Kyle Kam is from MoneyMax.ph, a financial comparison website aiming to help Filipinos save money through diligent comparisons of financial products.