For many millennials, studies have shown that saving and investing are not a top priority. Millennials here are defined as individuals born between 1982 and 2004, or persons reaching their adulthood in the early 21st century.
Young and eager to experience what the world has to offer, they choose to live in the moment, doing things that would satisfy their immediate needs and leaving the future to take care of itself. Because of this thinking, they are unable to make good use of the advantages that youth confers them, the most significant of which is a long investment horizon.
While everybody makes money mistakes, many of these are committed when we are much younger. Let’s look at the some of the most common mistakes that millennials make:
1. Spending too much. When you have no dependents and have your salary all to yourself, you probably don’t think much about the money you spend on frequent shopping or night outs. While it’s perfectly okay to indulge yourself every so often, make sure you don’t spend more than you make. Make a simple budget to guide your spending, so that you get to cover all your basic needs and be able to save at the same time.
2. Blowing credit. Worse than spending too much is falling into debt. You can spend a small fortune on finance charges and penalty fees if you do not pay your credit card bills on time. Some assume that their spending limit is their income plus credit card line. That’s not the case – the best rule of thumb is that if you can’t afford to pay for something in cash, then think twice before you swipe that plastic.
3. Not saving. It’s not enough to just cover your needs and occasional whims, you also need to save. Whatever your age, this is an imperative, and for good reason—life is full of uncertainties, and you really can’t tell when you’ll need money to cover an emergency need. Set up a savings fund by putting aside a certain amount each month. You’ll thank yourself for doing this when the time comes.
4. Delaying investing. It is never too early to invest. You can start with a little as P5,000 to buy a mutual fund, which you can add to in the years ahead. Remember that a long investment horizon allows you to make the most gains, because of the principle of compounding. Because of your age, you can let time work to your benefit, in the process creating the foundation of your investment fund.
5. Not investing in yourself. – It may sound like a cliché, but it’s true: your greatest asset is yourself, so you should continue to invest in ways to develop your skills and enhance your abilities. Travel to new places to widen your perspective, meet new people and build your networks, enroll in courses to update your skills and deepen your knowledge, find a mentor to teach new things. Always be on the lookout for opportunities that will enrich you mentally, emotionally, and spiritually.
As a single carefree individual without a family to worry about, most millennials are in the enviable position of not having to budget and having enough money to have fun. This is actually the perfect time for them to be financially-savvy.
Don’t waste this golden opportunity to set a solid financial foundation for yourself. Take a proactive stance toward your finances now and your future will be taken care of.