5 Most Common Money Mistakes Young People Make
Everyone makes mistakes. That’s how you learn. When you’re young, especially if you don’t have children, you have time to recover from mishandling your money. But if you don’t know you’re doing it wrong, how will you know you need to fix what you’re doing?
So Billshark wants to alert you to the five most common money mistakes you might be making that can keep you from attaining financial security.
- Failing to monitor spending
Money is funny: It can disappear before your very eyes unless you watch it closely. If you do, you’ll likely find it slipping through your fingers in dribs and drabs. A pumpkin latte here, a delivery pizza there, little splurges everywhere. And all done with a swipe, or even the spare change in your pocket. The problem is, what seems in the moment to be just a small dent in your budget gets lumped together with other “negligible” purchases and very quickly adds up to big bucks.
If you have “too much month left at the end of the money,” you need to understand where your money is going. Download a money-tracker app, or use old-fashioned pencil and paper to record every penny you spend for one month. We’re guessing you’ll have an “aha” moment when you’re done.
- Misuse of credit
Interest rates on credit cards these days are averaging around 16 percent. That means, unless you’re paying off your card(s) every month, you’re handing over 16 percent of your money to a bank for the convenience “buy now, pay later.”
The smart thing to do with credit is to use it to build your credit rating, not finance a lifestyle you can’t afford. That is, use each credit card to make small purchases, then pay off the balance every month.
Use loans to finance smart investments like a house, a car, or your education, not for weddings or vacations. Seek out the lowest interest rate you can find, and refinance down the road if interest rates drop.
- Short-term thinking
A “live for today” attitude prevents long-term planning, and eventual financial security. Our entire economy is built on consumption, and professional marketers are paid handsomely to understand the human psyche and how to use that information to induce you to buy. And let’s be honest: They’re very good at it.
But you can take your power back if you stop before you spend and ask yourself:
- Do I need this?
- Can I afford this?
- Can I buy it used for less?
- Is this something “they” are making me want?
It’s your hard-earned cash. Protect it from “them.”
- Trying to impress
Along those same lines, it’s human nature to want others to think well of us, but taken to extremes it can destroy your financial plan. In the old days, this mindset was called “keeping up with the Joneses.” If your next door neighbor put in a hot tub, you had to have one. If she bought a Porsche, you had to get a Ferrari.
This way of thinking is exacerbated these days because of Facebook, Instagram, Pinterest, etc. Everyone you see has money, has nice things, goes on great vacations, so why can’t you? Chances are, these people are making the very money mistakes we’re discussing: charging everything, living for today, not saving a dime.
Tell yourself that you’re living your life for you, not for others, unless you want them to own you. And do yourself a favor and cut back a bit on social media. What you don’t see there won’t hurt you.
- Not splurging
At the same time, unless you’re exceptionally disciplined and goal-oriented, if you live too frugally you’ll begin to feel deprived. Anyone who’s ever been on a diet knows what happens next: binge eating. Deny yourself any enjoyment of your money at all, and you’ll eventually end up binge spending.
You’re working hard; you deserve to have a little bit of fun with your money, so be sure to set aside a small amount of money that you can spend however you wish, guilt-free.
Finally, don’t make the mistake of paying more for your recurring bills than you need to. Let Billshark search out savings you didn’t know were there. For a free review of your bills, send them to us. You’ll be surprised how much we can save you every month.