4 Financial Mistakes to Avoid in Your Youth
Youth is the era of fun, enjoyment, and bashes without any massive responsibilities which allows a person to live his life on his own terms. It feels good to take most of your financial decisions to please yourself instantly but sometimes it is better to gauge the distant results for the habits you are involved in right now.
When we are young and don’t have so much financial obligations & liabilities then financial planning is often not used to be our high priority but as the life progresses, the financial situation changes and also these good times may unfortunately come to an end. Therefore, we must have an effective plan & strategy to conquer any kind of financial struggle in future. Our financial condition in the future could be a direct result of the financial decisions we make today.
In this article, I have mentioned some financial mistakes that you should be wary of:
1.Overspending or Living Beyond Your Means
Spending more money than required, unusual purchasing and living beyond your means just to influence & impress others is one of the common financial mistakes we use to do in our young age. Most of the people visit malls & restaurants very frequently, pay for lavish birthday parties or marriage anniversaries more often than their pockets allow. These types of habits eventually empty out your wallet along with the bank account which could also lead you towards unmanageable debts, hence it is vital to stay mindful of spending within your means.
2. Not Saving Money and Running Up Credit Cards
The top-secret to take control of your financial future is ‘saving money’. But you can’t save if you spend every penny you earn. Most of us have a misconception that our savings comprise what we have left over after our monthly expenditures which doesn’t seems to be a wise approach.
Many people use to carry multiple credit cards and even don’t realize the importance of checking their monthly statement and credit score regularly which lead to poor money management and build up a big pile of credit card debt. Another mistake made by people is to just pay the minimum amount on the due date. If you fall into the minimum payment trap, it will cost you lots of interest later on.
3. Not Making Financial Investment
Investing is one of the most effective ways of building wealth. It is never too early to save or invest. The earlier you start investing; more will be the amount which you will be getting at the end. Perhaps this approach will also allow you to make most out of the power of compounding and your money will grow exponentially.
When you are young, you generally have not any liabilities and it’s the best time when you can save and invest. You can even start SIPs & ELSS in mutual funds so that your investments are regular and interest you get on this is maximum with great tax benefits. If you want to know more about investments, then these websites will help you:
4. Not Having an Emergency Fund & Adequate Insurance Cover
Setting aside small amount towards an emergency fund can be beneficial, as you cannot predict when you will have a financial need. A contingency fund should be put in place as soon as you start earning. It will also save you from unwanted debt.
While one may have kept aside a fund for emergencies, having a life and health insurance cover is another important part of financial planning. The amount or package of such cover could depend on your age, history of disease, family members and presence of a secondary health cover. Not having an adequate life & health cover is another way of exposing yourself to risks, thus making your saving and investments susceptible to it.
Similarly, you must be aware of investing money also on your retirement funds so that you can enjoy a good life after retirement too.
You may be thinking this to be too early, but not having any idea about your financial planning & financial situation can be quite disastrous later in life. A wrong financial decision has a very strong chance of severely impacting your future. Avoiding such mistakes also help you to follow your unique passion and to fulfill your dreams. These mistakes can be avoided by a combination of financial disciplined life which includes budgeting expenses on monthly basis and reducing any useless purchasing habits. Never underestimate the power of compounding as you have plenty of years for it to work for you.
Avoid all of these financial mistakes to help set yourself up for financial success in the future.