“Watch out, world, I’m grown now…”
Career Wise defines financial literacy as the ability to apply financial knowledge to your everyday money choices. Making smart money decisions from the start will only benefit you in the long run. But financial knowledge isn’t something you’ll know naturally…
So, let’s fix that! Here are 7 money mistakes you should avoid when making financial decisions.
Accumulating Mass Debt
It’s easy for us to fall into the trap of delaying payments or accumulating a heap of debt. Having a bad credit score or a history of not paying your bills will only send you further back in life. It’ll be more of a challenge to get an apartment, make a down payment on a house or buy something that requires a large amount of money. Avoid accumulating debt by cutting any unnecessary credit cards and making monthly payments (even if it’s the minimum amount).
Not Saving Money Where You Can
Many millennials think they don’t make enough money to save every month. But even setting aside 10% of your monthly income can help build a decent savings account. Failing to do so puts you in a position where you’re forced to spend more than you should when emergencies happen or when you’re making a “big money” purchase. So, create a “rainy day fund” and save it only for emergencies. Think of it as your piggy bank of all your “spare change.”
Doing Interest-only Payments
An Interest-Only loan is when you pay only the interest on the loan, not the amount of the loan itself. Now there are some benefits to an Interest-Only loan, like getting to pay a lower monthly payment. However, eventually you’re required to pay off the full loan either as a lump sum or with higher monthly payments that include principal and interest. So it’s these types loans are helping you at all in the long run. Remember, money management is only scary when you avoid it. Deal with your financial situation head on, pay-off your debt and do not delay it. And before you apply for any loan, make sure that you know what the pros and cons are.
Letting Your Money Control You
It’s easy to fall into the trap of being a “big spender”. I mean, I’m sure your cart at your favorite online store is fully stacked as we speak. And that’s fine, to an extend. But keep in mind, you need a budget. I know, that’s the dreaded word. But, budgets get a bad rep. They aren’t strict plans that keep you in a fun sucking box. It means giving yourself the freedom to make certain financial decisions without the stress. All in all, live within your means, sis.
Not Setting Financial Goals
Goals are important, we all know this. But the financial goals are extremely crucial because it teaches you how to work, spend, invest, and save your money. Giving you a clear framework for all your financial goals and achievements, a financial plan helps you stay on track, teaches you discipline and most importantly, it motivates you to improve and increase your finances. So, create a list of all your financial goals for the upcoming year.
Thinking it Doesn’t Pay to Wait
Because, in fact, it does pay to wait. Make informed financial decisions by asking yourself if you truly want it, how it would benefit you in the long run and by weighing its pros and cons. This thought process before pulling out that credit card limits impulsive purchases. You may have heard the phrase, “sleep on it.” Well, that’s great financial advice. It gives you time to think and possibly find or think of a “more within your means” alternative. You don’t have to always settle for less, but buy smart.
Allowing Others to Monopolize Your Finances
Yes, to an extent, it’s fine to let your parents, guardians, or role models help navigate your financial decisions. We all need a little help. But remember, money that you earn is all yours! If you lack financial knowledge, allow someone to help guide YOU in how to manage YOUR money, but do not allow them to monopolize your finances. You have the right to spend and save your money (wisely of course). Remember mistakes are lessons for you to learn from. Adulting is being adult-ish. Meaning, you bound to not get it right the first time round. It’s good to ask for advice, but make sure that you are informed when it comes to your personal finances, not just blindly trusting a relative. Read up on proper ways to invest, how to start an emergency fund and don’t try to keep up with others. You have the possibility to thrive financially. Keep that in mind!
