The journey to financial security can be a struggle for most people, especially millennials. However, it is achievable if you are equipped with proper knowledge and committed to making smart money decisions.
The reason most millennials fall into this financial blunder is the illusion of waiting around for the "right time" before they commit to making the right financial decisions. The right time to commit to a sound financial decision is now, as delay usually leads to adverse economic consequences in the long run.
The reason most millennials fall into this financial blunder is the illusion of waiting around for the "right time" before they commit to making the right financial decisions.
Here are the five most common money blunders that millennials make and how to avoid them:
Spending above or at the rate your earnings
Many millennials fall into the trap of living beyond their means to keep up with the trend. This trend has led to a situation of constantly going into debt to cover their primary needs. Excessive debt and possible credit problems have financial consequences that can linger for years, like continually borrowing money, higher interest rates and the stress of just trying to get ahead financially.
Spending above your earnings is a major red flag for your finances. And the best financial advice is not to live within your means but to live below your means. Living within your means may not hurt you now, but it will hinder you from growing your finances at a higher rate.
Also, to avoid the trap of spending above your means, eliminate unnecessary expenses like upgrading to a bigger apartment just because you got a raise in the office. Avoid unplanned or impulse buying and don't plan for an expensive holiday because you got a bonus. Instead, save or invest the money towards strengthening your financial stamina and the bigger picture for you and your dependents. Also, if you have any unpaid debt, using your bonus to pay off any existing debt is ideal.
Overall, with some minor cutbacks, you can grow your finances and spend it on more essential goals such as buying a house, early retirement or supporting your family.
Spending above your earnings is a major red flag for your finances. And the best financial advice is not to live within your means but to live below your means.
Keeping an excessive amount of cash
Regardless of how disciplined you are, keeping too much cash is one habit that usually leads to unplanned and impulse buying. This habit of keeping too much money in hand may seem harmless initially, but in the long run, it's difficult to restrain your expenses when you always carry too much cash around.
And the best way to avoid this habit and the consequences that follow is to have a budget and stick to it. Have a budget that spells out all your expenses as well as your income streams. This way, you can easily track your financial inflow and outflow and be more purposeful with it.
Budgeting may not be the most exciting thing to do, especially for millennials, but it is crucial to secure your financial future. Create a budget that sets a limit to all your expenses and stick to it. You can get a budget sample online and adjust it to suit your unique financial goals.
Not having an emergency fund
Emergency funds or money reserved for a rainy day is quite different from saving for retirement. The purpose of an emergency fund is to help resolve unplanned financial demands in an emergency.
We cannot avoid emergencies like unplanned health demand, job losses and the likes, but we can better prepare for it and have plans to mitigate it. And the best way to avoid going into your savings when an emergency happens is to have reserved funds.
If you have not saved, especially for an emergency, you may spend all your savings or end up going into debt in a bid to mitigate the situation. Another consequence of this situation is that other aspects of your life that need finances will begin to suffer after spending all your savings to resolve emergencies.
A good rule of thumb is to save three to six months' worth of income, and it's critical to replenish the funds once they have been depleted.
Not saving for retirement
The subject of retirement usually seems quite distant from most millennials because of the perception that they still have many years before they even start to think about retirement. But retirement is just like every other aspect of your life; the earlier you begin to save for retirement, the better. Starting to save in your 20s and 30s for retirement can never be too early if you want to have a great life in retirement. The most regrets retirees have when they retire is not starting early to save for their retirement.
To build up an adequate financial backup plan capable of sustaining your desired lifestyle in retirement and funding all those adventures on the bucket list, you need to start saving or have an investment.
Saving and investing allows you to have funds for retirement accounts and other needs that may arise. When you have savings, it is easier to support and expand your investment by venturing into new investment opportunities. Through investment, you allow your money to work for you. It grows all on its own through interest or the increased value attached to the nature of the investment. You can read more on making your money work for you in our previous article here, part 1 and part 2.
When saving for retirement, pension funds remain one of the most strategic financial assets to secure your future—a pension fund otherwise known as Retirement Savings Account (RSA). With RSA, you set aside some money from each paycheck and deposit it with a Pension Fund Administrator (PFA) for a financially stable life in retirement.
To open an RSA, visit any Oak pensions' office nearest to you to pick up an RSA form or download it online at www.oakpensions.com, fill the form, and return it to the Oak Pensions' office. If you cannot pick up the form at any of our locations, send us an email at info@oakpensions.com or call our Marketing Manager on 09087448661 to request a visit by an agent for registration.
The subject of retirement usually seems quite distant from most millennials because of the perception that they still have many years before they even start to think about retirement.
ABOUT THE AUTHOR:
Ernest Ademola Ehigie is a Copywriter, Content Developer, Author, Brand Consultant, and Communications Manager with over 5 years in marketing communications. He has written several articles, policy documents, press releases, radio and TV adverts for businesses and organizations. He's the author of the book, "Why You Must Lead" and currently works as a content manager for Detail and Avedia, a leading retail and media consulting firm.
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