9 Financial Mistakes Millennials Often Make (And Without Knowing It!)

August 31, 2018

Remember Aesop’s famous fable about the ant and the grasshopper? Perhaps, this is the most pressing issue that millennials need to face. Millennials (or those who are born between the early 1980s and the early 2000s) and the youngest members of the Generation X tend to be more like grasshoppers. While ants are busy preparing for the future, the grasshoppers are busy with their chosen lifestyle – endless partying, unplanned travelling, impulse shopping, etc.

Where does saving figure in the equation? Now is the perfect time to discover whether you are making these financial mistakes that can affect your future or not and how to veer away from them.

Failing to budget

If there is one thing that the young adults tend to deliberately ignore that would be budgeting. They do this without realizing that the lack of budgeting often leads to living beyond their means. Not only this predicament puts a dent on future financial goals, but also compromises building a buffer against future debts. You might be aware of the rising costs of commodities, but do you have an idea what part of your income goes to monthly groceries, transport costs, rentals and other bills?

Solution:

Install a budgeting app on your smartphone

Relying heavily on credit cards

The millennials think that credit cards are free cash, when in fact they are not free at all and are very expensive to maintain. Credit companies lure the people into using credit cards at 0% interest rate. Oftentimes though, there are hidden costs that are actually disguised as interest rates. Not to mention, some youngsters have 2 to 3 credit cards, juggling between paying which card eventually becomes a burden. They end up paying very little or not paying at all, resulting in a poor credit rating.

Solution:

Discard the credit cards (or maintain only one card or consider obtaining a debit card instead)

Disregarding ownership

Compared to the baby boomers and older Gen Y members, the young professionals are not active homebuyers. The majority of the millennials are comfortable with renting without realizing that no equity is established whatsoever with renting indefinitely. Also, renting incurs the same monthly expenses as with owning a house, so why not choose the latter instead? On the other end, there are millennials who consider homeownership in the future. However, they are not doing anything to achieve such goal.

Solution:

Start saving for down payment and buy when a reasonable deal arises

Putting off having a retirement fund

Economic experts noted that the millennials are the ‘Generation Me’ wherein they are too focused on their now rather than their future. They postpone building their retirement fund for now, thinking that there will be lots of time to save for it in the near future. Unfortunately, that time might never come to those who delay things in exchange for other not-so-important things.

Solution:

Open a separate retirement account then save at least 5% of your monthly income

Ignoring life insurance

Despite the discussions about the benefits of obtaining insurances, there are still many young people who think that insurance is not for them and that they don’t need them anyway. Well, at least, not for now. What they don’t understand is life insurance policies can be more expensive when they are old and their bodies are already deteriorating. Another thing, no one is aware as to when their health might change. Getting covered is almost impossible once you get sick.

Solution:

Obtain an easy-to-maintain life insurance now

Overlooking discounts

We are living in the world of codes and vouchers, and yet some millennials kept on thinking that using them is ‘totally uncool.’ Discounts are made available to the young people for a reason and yet, they choose to spend carelessly. Stretching your peso is already a challenge as it is, but you can stretch it further by availing discounts. Nonetheless, not because an item is discounted, you will buy it. Ask yourself first if you need it or not.

Solution:

Research for the cheaper options first before making a purchase

Disregarding the ‘small things’

Everything adds up including your daily grind of Starbucks’ caramel macchiato and half-pack of cigarette. The young has a muddled priority if they are making priorities at all. They tend not realize that these small purchases can quickly escalate. For instance, a cup of caramel macchiato that costs about ₱140 will be around ₱34,000 a year. Imagine how much you can save if you slash down your expenses on those things that you can live without.

Solution:

Start listing down priorities and minimize spending by priorities

Making unnecessary expenses

Young as they are, they want convenience at all times. If an establishment conducts cash-only transactions, your next best step is to withdraw from the nearest ATM. Trouble is the fact that each non-issuer ATM transaction costs about ₱15 to ₱20, depending on the bank. The same goes for checking your balance wherein out-of-network machines charge up to ₱5 for each transaction. Do this five more times for the month, and you will easily lose your hard-earned money.

Solution:

Keep a small amount of cash on your wallet and stick to your bank’s machines

Missing due dates

Fees and interests (err, high interest rates) that are earned because of late payment is another unnecessary expense. The biggest culprit is the credit card charges as well as other fixed monthly payments such as loans. This can be very risky especially if you obtained the loan in exchange of collateral. Half the battle is won when there is no need to secure a loan in the first place.

Solution:

Create alerts on your calendar or sign up for automatic payments with your bank

Are you an ant or a grasshopper? So, what is the moral of your story? It would be much better to begin your transition from being a grasshopper into becoming an ant as early as possible. As a millennial, you are yet to fully navigate in the economy, but avoid doing these financial mistakes at all costs. This is your first step in realizing a more financially secure future.

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