Millennials guide to fixing common money mistakes
SOUTH Africans have topped global charts time and again as some of the worst savers in the world and unfortunately, millennials are no exception.
A survey conducted in 2017 by 10X Investments, revealed that millennials were worse savers than their parents, with only 35% of them investing for the long-term. Just starting out in life, many millennials already face the burden of student loans and credit card debt, before they’ve even earned their first pay cheque, so it’s no wonder that they struggle to save. Budget Insurance marketing manager Susan Steward said: “The good news is that by addressing these money mistakes now, a far brighter financial future could lie ahead for millennials.”
Here are tips for avoiding common money mistakes made by millennials.
Deciding how to use your first pay cheque will help immensely with managing your money now, and in the future.
Weighing up what you earn against your monthly expenses will give you a clear picture of where you stand financially. There are plenty of easy-to-use templates online that will help you get started.
Watch your virtual spending
As part of the swipe-and-click generation, who frequently pay their way with plastic more than paper, it’s easy to get swept away in a spending spree. Add in-store swipes to the ease of buying online, there are multiple ways to build up debt, without even realising it.
Good news is that technology has also given us great ways to save – like budgeting apps. Download to help track spending and improve your habits.
Beware of building up unnecessary debt
Moving into your first place is really exciting and so is kitting it out with furniture, electronics and appliances. Before you go straight to the store and buy new, try to visit markets and go online to find bargain second-hand purchases.
Also, ask your family and friends if they have any extras at home that you could use or throw a house-warming party with an affordable registry.
The same goes for your first car – buying a second-hand car, with low fuel consumption, can be a huge money saver.
Don’t forget to read the fine print
In another survey conducted by 10X Investments, 42% of the millennial respondents were unaware of the fees they were paying service providers.
Scrutinise the fees you’re paying and ask your service provider for clarity if need be.
Also, research alternative providers who may have lower fees or offer more value for money.
Save for an emergency fund
If your car needs major repairs or you lose your job, for example, a financial buffer could keep you afloat and give you the space to get back on your feet without going into debt.
Ideally, an emergency fund should cover three to six months’ living expenses. That might seem like an impossible amount to save, but by putting aside just R500 a week, for example, you’ll save R2 000 a month towards this fund.
Don’t neglect insurance
From car and home insurance to life cover, medical aid and pension fund – it is all invaluable financial safety nets.
Having these safety nets in place will help ensure that you have the means to pay for unexpected costs related to your health and your assets, and plan for your financial future.
Explore the most affordable options to suit your lifestyle and budget.
Set solid financial goals
Give thought to your five, 10 and 20 year goals. Will you be able to achieve those goals at your current rate of spending and saving?
Take into account changes in your life like marriage and children, inflation, a new home or car, annual holidays, etc. Start small, but define bigger goals for the future. That will help you get started and stay motivated.
Have a balanced view on credit
A healthy credit score is vitally important for big purchases like buying a house (getting bond approval can depend on this).
If you use your credit card for necessities, such as groceries and petrol, and pay it off in full every month, you can start to build a healthy credit score, which will serve you well throughout your life.
Considering that when millennials were entering adulthood, a severe market meltdown was under way, it’s little wonder that they may be sceptical when it comes to investing.
However, bear in mind that while the markets go up and down, there is an upward trend in the long-term.
Speak to a financial adviser about your options, because the earlier you start investing, the better.
“Investing time in budgeting, educating yourself on monetary matters and setting financial goals is an investment in your future, and one you’ll never regret,” concluded Steward.
Budget Insurance marketing manager Susan Steward