The world doesn’t run the way it did for the previous generation and today’s millennials have new challenges to face and paths to carve. Although some things come easy, many of us tend to struggle with financial management.
As a wise person once said – sometimes it’s not about the money, but rather the process of managing the money.
While having a steady income helps set a foundation for financial stability, it doesn’t end there. Here are 5 common personal finance mistakes that are made and you should avoid –
1. Spending at the same rate as you earn: not setting personal finance goals
Once you start earning, it gets tempting to spend on things you’ve always wanted. Living in the moment certainly has an appeal but beware of getting lost in the sauce. It leaves you with nothing for a rainy day or your future. Get a handle on your personal finance goals early on.
Another trap that millennials often fall into is the ‘lifestyle inflation’ snare. Don’t spend all of your bonus on an exotic holiday or upgrade to a bigger apartment just because you got a raise.
With good financial management, you can do all of this just a few years down the line and without having to worry about your bank balance depleting. We’re not saying you should live like a hermit, but who can deny the importance of making a budget in New York?
2. Not understanding how your credit score affects your personal finance
Is your credit score important? Yes! There are so many myths about what influences your credit score.
If you don’t have your info straight, you could unintentionally be harming your own credit score! Here are a few quick points to remember when you put together a budget in New York:
- 850 is the best credit score. However, as long as you have a number above 740, you will be eligible for the best lending rates.
- Your payment history, your debt and your balances impact your credit score the most.
- Pay off your debt in time and the full amounts due. Carrying balances when you don’t need to will add interest to your loan and bring your credit score down.
- Try not to use over 30% of the credit available to you at any given time!
3. Not signing up for health insurance
Insurance is an important part of your financial management. In case you didn’t know, not having health insurance could mean being charged with a penalty when you file your taxes. There is also the danger of an accident or unexpected illness that can blow way past your personal budget in New York.
It’s a big gamble that could put you in debt. In some cases, even graduates can be covered by their parents’ health insurance. If you’re not eligible, look for the best possible plan keeping in mind the essential nature.
4. Poor financial management and having too many credit cards
Using a credit card instead of a debit card does offer an additional layer of safety from identity theft or fraud. But beware of signing up for more credit cards than you can handle. It’s important to pay them off every month so as to not let debt pile up.
If you entered the workforce recently, focus on building up your bank account rather than spending cash. Once you have a decent balance, it will become easier to pay off your cards. Remember that a credit card is not there to pay for your necessities.
These tips may come in handy: 6 Golden Rules To Plan Your Finances
5.Putting all your savings in a single fund (and not having a rainy day fund)
Many millennials make the mistake of saving for just one thing at a time – like for a house or a car. However, if 2020 has taught us anything, is that you need to be prepared for unexpected situations. So, having an emergency fund is key. This should be able to support you through an illness, an accident, or job loss for about 3-6 months.
A rainy-day fund is for a different, smaller purpose. It’s for an emergency plumbing repair or a sudden trip to the mechanic. Setting aside money for emergencies and unexpected expenses means you don’t have to dig into your main savings nest egg. It offers plenty more financial stability.
Are you guilty of these? Common Excuses For Not Creating A Personal Budget Remember that budgeting your personal finance helps you stay ahead!