5 Common Financial Mistakes Young People Make
Financial discipline and management and discipline are important in how successful you become than the amount of money you earn. Lacking those two important skills will always leave you with a deficit that you have to fill by borrowing regardless of how much you earn.
Young people are especially prone to self-destroying their finances either due to lack of financial education or the impetuosity of youth that often comes with a lot of bad decisions. The way you handle your finances in your 20s determines your financial status later in life and you need to avoid these common financial mistakes if you want a secure financial future.
Buying what you don’t need
Succumbing to peer pressure and wanting to keep up with your friends could ruin your finances. Many young people buy items they don’t need and can’t afford in order to keep up with their friends.
This reckless spending sooner or later leads to financial disaster when you can no longer service the debts you took to buy stuff you absolutely have no use for and auctioneers come knocking on your door. You also ruin your credit score which have dire financial implications in both the short and long terms.
Depending on a single income
Putting all your eggs in one basket has never been a brilliant idea. Depending on a single income is a financial mistake that limits the amount of wealth you can build and also puts you at risk of financial hardship when you lose the single source of income.
A smart person should always have multiple sources of income to insulate them against possible loss of a job. Start a side hustle and get advice from the The Small Business Support Network on how to steer it into profitability.
There are a lot of other money-making ventures you can do to earn some extra money on the side.
Lacking a budget
It’s practically impossible to account for your money if you don’t have a budget. Many young people go about spending their money without any plan hoping that everything will simple fall into place and when they don’t , they take care of their expenses through credit card debt.
This gives room for impulse buying and doesn’t prioritize savings.
Not planning for retirement
Many young people think retirement is so far away and fail to take advantage of the compound interest factor which could see them earn more money on their retirement savings if they began early.
Spending everything you earn at the expense of retirements savings also make you miss out on incentives such as tax breaks such accounts come with.
Living beyond your means and taking consumer loans to fund your lifestyle harms your financial security. If you must borrow, have a plan on how you are going to spend the money, preferably an investment that can service the loan.
Don’t accumulate credit card debt. Pay up on time to avoid accruing hefty fines and damaging your credit rating which affects your ability to borrow in future.