Finding the right balance when it comes to money can be difficult, especially when you don’t have a lot of knowledge on how to properly manage your finances. This has been particularly relevant for millennials, many of whom are burdened with big student loan payments, and have lived through both the burst of the dot com bubble and the recession in 2009.
This combination can make the economy seem unpredictable, and when there is an uneasy sentiment regarding economic stability, prioritizing smart financial habits over lifestyle spending and instant gratification buys can seem abstract and unimportant. However, it is important to develop healthy financial habits; financially unhealthy habits are still unhealthy, whether the larger economy is in great shape or poor shape. With that said, here are 3 money mistakes millennials need to stop making.
Impulse Buying Instead of Saving
Trying to build a healthy amount of savings in 2019 can be especially difficult, with near-constant access to convenient online shopping with two-day shipping, food delivery apps, and targeted advertising that knows just the sorts of products and services that appeal to you. With all these alluring options at your fingertips, it can be easy to end up spending a lot more money than you realize and finding yourself with little to no savings at the end of the month.
There’s a fairly simple rule that you can follow to try and limit impulse buying, called the ten-second rule. It goes something like this: before you buy something on impulse, stop for a second, and give yourself ten seconds to think about if it’s a purchase you really need to make. Simply stopping and thinking for a few moments gives you a chance to let the impulse pass and make a decision more based on need than want. While saving money when you’re young might not seem all that vital, it’s important to have a healthy savings for retirement age and emergency situations. If you’re able, putting aside 20% of your monthly income for your savings account is ideal. If you don’t have a savings account, HRCCU has a number of great options, no matter your financial situation.
Avoiding Budget Planning
While breaking down your monthly income and expenses can be a frightening exercise, creating a workable budget is an extremely important part of establishing healthy money habits. Without a budget, it’s easy to end up overspending on something and finding yourself in a tricky financial situation. Creating a budget can start you down the path of paying off debt and creating financial savings goals, which will ultimately put you in a better position for the long-term. While the initial budgeting can be intimidating at first, once it becomes routine there’s a certain level of satisfaction in seeing payment balances shrink and savings grow. Plus, you won’t get stuck eating ramen for a week straight because you overspent (unless you want to).
Everybody knows someone who has charged a ton of purchases into credit cards and found themselves in major debt because of it. It seems that these horror stories have pushed many millennials away from using credit cards, with nearly 2 out of 3 choosing not to carry a credit card. This isn’t necessarily a bad thing--but as a partial result millennials are building average credit scores that lag behind what Generation X had built in the same age range.
An alternative way to build a solid credit score is to pay all of your bills on time, and utilize financial institutions for auto and personal loans and make the monthly payments on time. Still, having no credit card payment can slow down building credit, which could become a problem if you someday want to take out a mortgage and own a home. You should only apply for a credit card if it’s something that you are totally comfortable with, but if you do feel motivated to, HRCCU can help you get started.
While responsibly navigating the world of personal finance can be tricky, HRCCU can be your guiding hand when it comes to the do’s and don’ts. If you feel lost, we’ll get you in touch with a financial coach who can help you avoid each of these money mistakes, and create smart and healthy spending habits!