Update: This article was last updated on 30th Nov 2020 to reflect the accuracy and up-to-date information on the page.
The millennials are a generation of creativity, innovation, and self-belief. They are willing to sweat it and risk it if the results mean success. They have changed how the world looks and behaves.
However, with this entrepreneurial mindset theirs comes the tendency to rush into decisions.
While being quick on their feet has helped many make their fortune, it has been disastrous for most. Critical decisions, especially the financial ones, are not to be made in a rush.
The key factors like risk recovery, potential financial repercussions, market status, and budget flow should be considered before a decision is made. However, most millennials tend to throw these factors out of the nearest window.
Having a comprehensive understanding of how money grows is a must if you want to achieve success, both financially and personally. Don’t be one of those guys who could have made it big but didn’t because you could not manage your money. Be the guy who did make it big.
Here we discuss some of the key mistakes millennials tend to make when making financial decisions. Read them thoroughly, understand them, and make sure you do not commit them.
1. Not Building an Emergency Fund
People in the current generation believe in ‘living in the moment’ and do not focus on the future. Although it seems to be the right thing to do, not planning for the future can prove disastrous. Any financial calamity can occur suddenly, leading to a loss of assets or revenue. At such a time, if you do not have some additional deposit saved, you can find yourself in a pickle.
Hence, you should always keep an account separate for emergencies. As a result, even if there is a problem with your finances, you can use that deposit to sustain it. It is generally recommended to create an emergency fund covering 6 to 9 months of your expenditure.
2. Not Having a Budget
The revenue you earn every month is obvious to you. However, the expenditures are not. There can be any unforeseen expenses that may befall you any day.
It can be an event like a rock concert, a commodity that you find attractive or useful, or there is an essential task such as repairing and maintenance that you did not expect. All these can be a dent in your earnings. Hence, you should plan for the month to start itself and keep some amount for the unforeseen expenditures.
3. Neglecting Cash Flow
It is essential to keep track of the cash flow. It means that you should be aware of how much revenue is coming in and going out. It is a normal tendency for individuals to increase their expenses with an increase in earnings.
However, sometimes you lose track of the expenses and spend on expensive yet worthless products that are not in accordance with the earnings.
4. Spending More Than the Income
You should never spend more than you earn. However, if that happens, you start digging into your savings and deplete it slowly. Hence, you should always monitor your earnings and see that the expenditure does not exceed it.
5. Getting Hung Up on Small Things
It means that you should be not getting caught up in saving the expenses on small stuff but miss out on huge savings in other aspects. For instance, if you decide to quit coffee, you could save a hundred dollars a month. However, at the same time, you buy something expensive that costs five hundred dollars, i.e., five months of saving on coffee.
6. Not Saving For Retirement
Saving for your retirement may seem to be a thankless task today, but indeed after years, you will thank yourself. You may realize that it is necessary to save for retirement but think that you have a lot of time. Instead, the earlier you start saving for retirement, the more the funds you will have after retirement.
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