7 Big Mistakes Young Professionals Are Making With Their Money
As twenty-somethings, we don’t often have the most secure finances. It’s something that we all aspire to someday. But getting there is often a lot harder than we imagined.
If we’re honest, many of us aren’t all that good with our money. Here’re some of the biggest mistakes we’re making as a generation, and what to do about it.
We’re Spending Money To Make Ourselves Feel Happy
It’s been said time and time again that money doesn’t make you happy. But, of course, spending money in the here-and-now does provide some temporary relief. In that way, it’s a bit like any other habit or addiction. It’s a way of feeling better in the short term at the expense of the long term.
Of course, nobody is going to resolve the fact that they’re not happy just by spending money for the sake of it. That’s why getting to the bottom of your shopping habit is an excellent idea. If you’re really suffering from a lack of meaning or purpose in your life, it might be time to review what you’re doing. Is there a better job opportunity out there, for example?
No Savings For An Emergency
Right now it’s predicted that about 50 percent of Americans are living paycheck to paycheck. Yes, some of this is because of how the economy has been rigged against them. But some of it is also down to frivolous spending.
Never having any spare money is bad for many reasons. For one, it’s stressful not having anything in the bank. And two, it means it’s a lot more likely you’ll have to take out a personal loan at some point. These loans can be very expensive to maintain. Thus, having some spare cash for those unplanned expenses is a good idea. It’ll make you much better off in the long run.
Buying Expensive Uniforms
One significant cost of work, especially professional work, is the uniform. Young professionals, particularly those in the medical field, tend to get through clothing at an alarming rate. And though it might not seem like a lot of money at the time, the bills can rise at an alarming rate.
Some uniforms, like those at Uniforms and Scrubs, are priced lower. So picking up items, like lab coats, scrubs and shoes needn’t be a big cost. After all, who wants to spend all their money on clothes they have to buy to earn money in the first place? Not many, I’m sure.
Not Making Investments
Today we’re living in strange times when it comes to investments. But it’s important that young people adapt to the world as it is, not how it should be. That means accepting the fact that saving in cash just isn’t a viable option anymore. Interest rates are so low that even saving in a savings account means that you’re losing money, thanks to inflation.
To stand any chance of making a return and increasing your wealth, there are only two real options out there. One, of course, is to buy stocks and shares. Over the last few years, we’ve seen the stock market climb consistently in nominal terms. And that has meant that some people have still made handsome returns. The other option is to buy precious metals. These don’t pay a dividend of course. But they’re a great hedge against inflation and stock market crashes. Most portfolios should have a combination of both metals, stocks, and cash, just to be safe.
Being Too Frugal
Most twenty-somethings want some type of financial stability by the time they’re thirty years old. That’s great. But some take this too far and think that they can never spend any money on themselves. All their money has to go towards either student debt, or a house deposit, or both.
But this attitude is a step too far for all but the most ascetic. Most of us don’t have the self-discipline to go week after week without any spending. And the result is that a lot of us end up binging, wasting more money than we would have otherwise.
Here’s the trick. Make sure that you set aside a small amount of money every week for the finer things in life. The emphasis here is on a small sum of money. Once you’ve resisted the urge to splurge, you’ll avoid wasting money on stuff you don’t need.
Not Using Their Credit Cards Wisely
In a world overflowing with credit, it’s a good idea to have a credit card. Credit cards are a great way for young people to build up their credit scores, giving them access to loans and mortgages.
But credit cards can also be a liability. For starters, if they’re not paid off at the end of the month, you can get hit with a nasty interest payment. And secondly, if you do run into trouble, credit cards can actually negatively affect your credit score.
So here’s the trick. Pay off your credit card debt at the end of every month. But make sure that you’re spending a fair chunk of your money through the credit card itself. This way you get the best of both worlds: low-interest fees and a high credit score.
Choosing Money Over Career Progression
Some jobs pay really well at the starting level, and they’re enticing. Think photographers. But the problem is that a photographer doesn’t have much opportunity to progress and earn a higher income. Now consider the example of a trainee accountant. Here’s a job that doesn’t pay as well, to begin with, but over time the pay is much higher.
Twenty-somethings who want to achieve financial security should go for jobs with growth prospects. Find out what careers paths are available, what salaries you can expect and whether there is a path to promotion. You’ll often find that although the starting salary is low, it quickly scales in the first couple of years. Before you know it, you’re on a lot more money than you would be getting paid than the other job.