Millennials are considered to be irresponsible and deemed so by boomers. Millennials might have different ways of doing things but that does not make them irresponsible. Yes, they make mistakes but it is just like any other generation who went through a learning curve.
Making mistakes is a huge part of the learning process. Here are some of the common financial mistakes that are made by the millennials:
Having Massive Credit Card Debt
One of the initial challenges young adults face when they start earning is to buy everything they dreamed of in their college years. This leads to buying material possessions which exceed the savings of most young adults. These goods are usually surplus to needs and one ends up paying more than its actual cost of it over time.
When you’re young and living essentially from paycheck to paycheck the use of credit cards is one of the most convenient ways to buy luxury products. The use of credit card installs the habit of living on credit and each passing month of unpaid balance pushes one in the deadly cycle of chasing debt.
One of the ways to avoid the credit card debt cycle is to make sure that you pay the balance of the previous month is full before you use it again.
Not Using Credit at All
The horror stories regarding credit card debt encourages some millennials to avoid the whole thing in itself. Even though this may seem smart in the beginning but when you want to apply for the inevitable house or student loan, the financial institutions look at your credit score (FICO) which considers payment history, debt to available credit ratio, length of credit history, and type of credit in use. Not having any credit history at all may not fare well with getting bigger loans in the future.
Not Paying Bills on Time
Even though being late on one or two bills won’t hurt you too much, making a habit out of it can end up messing up your entire yearly budget with the accumulated fines. With the number of non-discretionary payments increasing every year, it is important that you lay out your budget beforehand and have an estimate of savings that you may have by the end of the year.
The monthly or yearly budget you make holds true on the assumption that you identify and pay your bills in a timely manner. A blunder on the budget estimate can spark a domino effect of spending more than you actually make.
These are some of the most common mistakes that many people knowingly or unknowingly make. The mistakes mentioned aren’t even big enough or technical enough that they can’t be improved upon. Being mindful of how you deal with your financials and keeping an eye on the cash flow – are a few of the main things that will help you overcome these issues.