As we all know that history loves repeating itself, several financial experts and industry advisors warn that we will see a global economic collapse in 2019. This means that there is no time to waste when it comes to building our financial IQ. Here are 5 disastrous mistakes many millennials are making with their money that could seriously harm them in the near-future.
- Ignoring Budgets
Everybody under the sun advocates using a budget – myself included. Many of us enjoy the thought of budgeting, and certainly enjoy the idea of budgeting. When push comes to shove, though, a lot of us gladly spend more money than we planned for in our budget. This mental weakness is a result of not being disciplined enough to stick to a plan.
- Killing The Future
A lot of us practice mindfulness, or being in the present moment and totally living in the now. While this is a positive reinforcement for living a naturally happy and healthy lifestyle, it becomes frail idealism in the world of personal finance. For example, inflation is often responsible for reducing the value of our currency, but is not something many people prepare against.
- Being Anxious
It is easy to feel anxious about finances. It’s easier to crack under the pressure of paying off $125,000 worth of student loans. By allocating every source of income towards paying off that debt, other areas of our lives become disorganized, chaotic and downright stressful – making life more difficult. Sometimes refinancing your student loans is the best option to get you out of debt.
One way to balance out the levels of anxiety is by investing in dividend exchange-traded funds (ETFs). These are index funds that collect multiple stocks across various fields, which make it easier for you to own that stock. Some companies pay back their shareholders with dividends, which can be thought of as a “prize” that investors get for putting money into the company. Over time, investing in dividend ETFs can be turned into a source of passive income. (You can then use that income towards paying off any debt.)
- Ignoring Credit Debt
Charging a credit card for a $5 – $1,500 purchase is the easiest thing in the world. Paying off those purchases at the end of the month is another matter – and is one of the primary reasons so many people, spanning across all generations, are crippled by debt right now. Late payments are detrimental to the efforts to pay before the 20-30% interest rates kick in. They also make it more difficult to receive the benefits from picking life insurance – companies like IntelliQuote offer specialized protection gaps that will protect millennials when the time comes.
- Not Learning About Finances
One of the most beneficial things millennials can do is to increase their financial intelligence. This means figuring out as many aspects of the economy, finances and money management as possible. A great place to start is reading Robert Kiyosaki’s best-selling book, “Rich Dad, Poor Dad.” The more we familiarise ourselves with financial concepts, the more information we’ll gather, which we can turn into knowledge by using what we learn to become financially independent and durable.
In order to stop making mistakes, we have to realize why we are making those mistakes in the first place. Usually, they’re a result of ignorance – or not knowing what to do in certain situations. By soaking up knowledge like a sponge, we become much more confident in our ability to handle money. It’s true that educational institutions never taught millennials about money.