Most young people dream of becoming financially independent and even rich by the time they are past middle age. However, most of the time, this depends on a host of factors, the most important of which is how financially responsible they are. The issue of financial responsibility is unfortunately very difficult for many young people to grasp, and this in turn means that they may not have a chance to put their financial life in order when they are young. There are a few mistakes that most of them make, and which often have a negative impact on their finances. Some of these include:
Not making full use of discounts
These days it’s very easy for one to use discounts to buy various goods and services. For instance, you could go online to get coupons and then use them to buy whatever you need at a much lower price. However, the problem is that most young people don’t think much of such discounts. The fact that the nominal value of each normally seems very small usually makes such individuals think that they won’t save much anyway if they used the discounts. However, this is essentially faulty reasoning, since regular use of such discounts has beneficial effects on long-term finances.
Improper use of credit cards
Most youngsters also have a difficult time using credit cards and other forms of credit. For instance, they might fall into habits of not paying off the bills on time, which could end up ruining their credit scores. This is not a good thing when you consider the fact that they do this from an early age, which means that when they reach middle age they usually have very bad credit scores. This in turn means that it would be difficult for them to get loans or other forms of credit at friendly rates.
Not getting a hang of budgeting
When you need to take control of your finances, one of the most basic yet important skills you can have is how to budget. However, most young people don’t do this right, and this means that they end up having a hard time later on. With the advent of Internet Technology and the use of apps, budgeting should be very easy to do today compared to the past. The fact that economic times are harder today compared to in the past also means that most young people have more to lose by not budgeting properly, so this is something they need to keep in mind.
Not assessing limits when getting credit
In life, it’s usually necessary to get a loan or mortgage to buy something of very high value such as a house or a car. In fact, it’s better to do this when you are young, since it means that you will have enough time to pay off the debt before you get too old to enjoy your investment. However, one problem that most young people make is not applying for such things in the right manner. For instance, they might not adequately figure out how much of a debt they can handle, and then end up chewing off more than they can swallow. This often leads to problems such as difficulty in paying back the debts.
Not keeping in mind the fact that little things do matter
Some habits count as little things, and these tend to add up over time. For instance, there are some people who make a habit of drinking coffee regularly, even if it’s evident that they would still be able to function without it. Most of the time, this is done with the idea that this habit is not very expensive. However, the costs of these little habits can add up, and with time you may end up spending a huge chunk of your income on them. It’s therefore best to take even the smallest of expenditures wisely, especially if they are regular.
Not having an emergency fund
Whenever problems that need urgent attention crop up, most people who don’t have emergency funds to handle them end up having a difficult time handling them. In some cases, they might have to borrow money at exorbitant rates in order to deal with them. Making sure that one has an emergency fund for such occurrences is wise, and ultimately cheap as well.
Using automatic payment systems
Using automatic payments seems like a good idea. The fact that they get deducted from your account automatically means that you need not focus on some of these recurring bills, which is a good thing for a busy young individual. However, some of these payment services cost money, and there are times when you may end up over drawing your account as such costs eat into your deposits. If you want to take control of your finances, it would be easier to set reminders to pay such bills manually.
Getting joint accounts
Most young people open joint accounts with their partners on a whim. However, this might turn out to be a source of trouble, since you may end up having trust issues and even having disagreements over how money is used. Before doing this, it’s wise to first iron out the fine details such as how you are going to operate the account, and who will be responsible for what expenditures.
Not understanding ATM fees
Most people draw money from ATM’s, and this might turn out to be a drain on resources if one does not understand how they work. It’s important for young people to minimize how much they spend on ATM fees, such as by always withdrawing from ATM’s of their banks, and also making sure that they minimize the number of withdrawals they make.
Having no long-term plans
In order to secure themselves, people need to have long-term plans, and also make a point of making such plans work. This is something that most young people don’t think of, mostly because they don’t find it necessary given how much time they have. However, this is an attitude that should not be used. Having long-term plans increases the chances of one being at a better place by the time they are at a more advanced age, at least in terms of finances.