For the debt owing and forever cash-strapped Millennials, the stock market despite of its heavy returns isn’t really as striking as it is to other generations. More than any other age group, Millennials prefer using cash to set aside any investments. The problem here is, it is the worst ways to earn any sort of returns. It doesn’t align with millenials’ expected longer lifespans, medical costs or any other ambiguity about social security.
For decades, Millennials have always been criticized for their spending habits and lifestyles. There are a number of vindications for this kind of behavior. The Millennial club has witnessed their parents go through a housing crisis, the dotcom era, which may have influenced their behavior. Regardless of these challenges, Millennials can still avoid some common investment mistakes and look frontward to a brighter financial future.
Zero savings
Emergencies do happen. They are just a part of life. At some point or the other in some decade, most Millennials will face a major financial crisis which could be a major illness, unexpectedly losing a job, or the breakdown of car. By not having enough finances saved to prepare for such circumstances, most of them are just one step away from financial disaster.
Experts recommend having an emergency fund that will cover at least an expense of three to six months should the unexpected happen. An easy way to save is by keeping it automatic. Start from saving a small percentage of each salary and you’ll be astounded to watch those savings grow little by little.
Making use of credit for everything
Credit cards can be really helpful if used cleverly. The problem our generation is facing is that most of us use credit cards for almost everything. Clothes, lunches, shopping, movies, clubbing – just everything! This lifestyle of buying now, paying later can come at a cost. With the ever increasing interest rates and never ending repayments can take away your hard earned money that ideally should go towards short-term savings or investment.
Fail to plan for their cash-flow
People who have a clear understanding of their monthly budgets, expenses, savings, debt reduction strategy and investments are more likely to achieve their financial goals. On the contrary, for some individuals, money comes and money goes. There’s no record of most of these expenses. And we are left with no option but to wonder where our money went at the end of the month. Sometimes, setting a budget can seem intimidating and over-whelming.
Whatever we chose to term it, we must have a strategy for our cash flow or it will flow right out of our hands without even realising it.
Not taking risks
Millennials can afford to take little risks when it comes to their investments. Most of them have 30 to 40 years ahead until they will need to withdraw from their retirement accounts. Taking risks doesn’t necessarily mean you need to blindly invest in any product that gives you higher returns. You first have to understand the product and only then consider investing in it. Time gives different investors a distinct advantage. Taking risk in terms of retirement accounts could cost you purchasing power over a period of time.
The contentment that one gains after reaching a milestone in net worth or paying off debt is addicting. It all starts with a financial plan. The key is to recognise all the drawbacks and to learn from it.
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