As a generation focused on living in the moment, millennials are prone to making big mistakes with their finances. We spend too much time on online shopping, streaming websites, viral restaurants etc. But no worries, because these are the money missteps this generation is making and here’s how to combat them!
Life is often unpredictable which is why emergency funds are important! When unexpected situations occur – medical issues or a job loss – it is crucial that we have a fallback account to rely on as an extra measure. But millennials are completely oblivious to this particular means of security! The lack of preparation on their part will leave them stranded and lost, and inevitably, they will apply for a credit card (which means more debts according to CNBC).
So, a little advice to millennials: set aside a small amount each month and work your way into building up your emergency fund of at least 3-6 months of your expenses.
Other types of emergencies to be prepared for:
Read up more on our Millennial’s Guide to Insurance here.
Instagram is addicting, I know, and just like everyone else, you want to fit in and be part of that culture. But spending more than $15 on bubble tea and going to hipster cafes every weekend is going to burn a hole in your wallet faster than you can blink! Millennials carefree approach to life – with mantras like, “Treat Yourself First and Think Later”– is a big factor to why they are constantly “broke”.
Learn how to save up and have discipline. Take the time to calculate your monthly expenses and do the math from there – are there certain things you need to cut off (perhaps the expensive bubble teas, for instance)? Also, a change of mindset would help too. Just because they seem happy with that lifestyle doesn’t mean you would and should as well.
Once millennials prioritize their needs and recognize their wants, they would have no issue living a modest and content life without falling for social pressure!
A very easy trap to fall into, a lifestyle inflation refers to increasing one’s spending when income goes up. Lifestyle inflation is a “natural process” for graduating students, in particular – leaving the straining student lifestyle into being full-time employee. That means, upgrading your car from a Kancil to the new Myvi just because you can, or moving out of your small apartment that you share with three other people into a bigger apartment all by yourself as soon as you got your bonus.
“If you have the money, why not spend it?”
A valid point but do you really want to spend so much with every salary upgrade that your bank account balance looks exactly the same as it did before your salary increased?
Instead of buying materialistic things try investing in experience and knowledge. Save money for a Europe trip or sign up for a foreign language class. Avoiding lifestyle inflation can mean achieving financial independence at a younger age, having the financial flexibility to choose a dream job over a higher-paying option, AND retiring early. Now that’s living the dream, am I right?
What happens when you sit for a test but you didn’t study for it? You fail, correct? That’s basically how millennials approach money – they don’t know anything so that’s why they struggle to be financially successful.
Financial literacy is vital. Without it, how can you expect to make smart decisions if you can’t comprehend concepts like credit, debt and how interest works? So, if you’re a millennial and you’re reading this, do your research! Read up a lot and practice suggested tips. Work with a trusted SyncWealth financial adviser if you don’t know where to start.
Do not delay obtaining this knowledge. A comfortable life takes effort and sacrifices. Be really clear with yourself about what you want and what you want to achieve.
Not planning for your retirement is the biggest mistake you can make.
When you’re in your twenties, retirement seems a long way off. Having the mentality of “I’ll worry about it later” is dangerous because procrastination is addictive. Millennials often seem more interested in instant gratification and may wonder why it is important to stash and invest money when they could use it to live the lifestyle they want.
But beyond just saving, INVEST. And we mean it. Inflation eats into your savings, so you’re essentially just burning money if you let it lie dormant.
You could spend your whole life trying to save bits of your income here and there, or perhaps you were not a spendthrift to start with; but you lack the insight, wisdom and knowledge to grow your WEALTH – AND THAT MAKES A LOT OF DIFFERENCE.
It could possibly translate into you working till 60 and retire with a bare minimum bank account to survive for the next 20 years, or it could mean you could retire as early as 45 and have a comfortable amount in your bank account MONTHLY – just by investing and receiving passive income from your assets and portfolio.
Think about it.
Money mistakes are inevitable and millennials aren’t the first to suffer from it. But with time on their side, it is not impossible for them to turn the wheel around and become financially successful.
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Edited by Serene. T
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