How To Avoid Common Finance Mistakes Young Adults Make
Monday, January 9, 2012, 2:00 AM | 1 Comment
The worst part in personal finance is that everyone can make mistakes as in other aspects of life. Even billionaire Donald Trump declared bankruptcy at one time, perhaps because he made mistakes in handling bank loans or overbuilding. The more important thing is to keep mistakes at an absolute minimum. You can learn from other folks’ mistakes as well and not necessarily from your own mistakes.
Following is a list of the more common mistakes young adults make:
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Buying unnecessarily
What young adults normally do
You buy things you don’t need, often considered as impulse buying. Make a list of what you need and stick with items on the list. Spending on something you really don’t need can be a big waste of your money. Even when you get the bill and you don’t realize you have spent more than you can afford by paying only the minimum, I consider that pure and simple stupid. You can make it a lot worse by putting the purchase on a credit card and paying monthly interest charges.What young adults should do
Do a little research before your major purchases. Do comparison shop before you buy. Ask yourself if you really need the item (for some, it’s probably the hardest thing to do.) If you really want to save money and you should, wait a day or two, or just a few hours, to really think about the purchase rather than making a quick and costly decision you may come to regret.If you can, pay the entire balance on your credit card to avoid interest charges or as much as you can to minimize them, which can add up significantly.
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Getting heavily in debt
What young adults normally do
Buying on credit is the norm whether you can pay it in full or not. Sooner or later, you keep getting into deeper debt shit. Most young adults don’t realize it till the time comes that they ask for help and start cursing the economy. I know it’s hard in this lousy economy but we play it hard as well.Taking on too much debt can create enormous problems. Each year millions of young adults find themselves struggling to pay their loans, credit cards and other bills.
What young adults should do
Recognize the warning signs of a serious debt problem and when you do, stop spending unnecessarily and buy what you really need. Take corrective measures. Try to pay off your highest interest-rate loans on your credit cards as soon as possible, even if you have higher balances on other loans. For new purchases, instead of using your credit card, try paying with cash, a check or a debit card.And stop spending money on your girl friend. She may have a better job than you do. Ask her to pay her share. There are also reliable credit counselors you can turn to for help at little or no cost. Worse come worse, talk to a reputable credit counselor.
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Paying bills late
What young adults normally do
Young folks initially don’t care about their credit score. Their credit history will be stained but they will not even try to get their free annual credit report so they can fix some, if not all, of the problems. They keep themselves in the dark. They may not know about the three credit bureaus. These bureaus prepare credit reports for use by lenders, employers, insurance companies, landlords and others who need to know someone’s financial reliability and risks.While missing a payment once in a while (as in once a year) will not damage your credit to the core, but missing it habitually will definitely put you on the road to financial hell.
What young adults should do
So don’t procrastinate and pay all kinds of your bills on time. Try to pay them before the due date. Get your free annual credit report now. Make sure information on the report accurately reflects the accounts you have and your payment history. Ask credit bureaus to correct any discrepancies. -
Having more than two credit cards
What young adults normally do
Young folks try to get as many cards as they can. The more credit cards you carry, the more you would buy on impulse. That can be very costly. When you apply for many cards, you can be seen as a person who does not hesitate to get into deeper debt shit.What young adults should do
Some experts put a maximum of four on the number of cards you should carry. For all practical purposes and to control your spending, two credit cards should be enough. -
Not controlling expenses
What young adults normally do
It’s very easy to overspend on something you don’t actually need. The temptation to buy almost anything is too high. Young adults don’t follow a budget, so they tend to overspend.What young adults should do
Control your spending. Let your girl friend know she should pay for her share. Create a simple budget. It doesn’t have to be complex. Just be in a position to know how much money is coming in and how much is going out. -
Not saving enough for future
What young adults normally do
When I was younger, I mean a lot younger, I never even thought about saving for the future. Retirement never even cross my mind. That’s why I am at a point where I have almost no money in my saving. I don’t even have a savings account. Statistics say too many young adults have very little, not enough, stashed away for retirement. Spend, spend, spend and not saving for future is stupid.What young adults should do
Young folks should start saving for retirement. Before you know it, you will be knocking on the door of retirement. It’s very important for young adults to save money for their long-term goals. To really grow your money, start investing. Investments, which include stocks, bonds and mutual funds, can be attractive alternatives to bank deposits. -
Not being careful with bank fees
What young adults normally do
My son does not check his bank account before using his bank debit card. He was charged $35 twice because his account did not have enough funds for his fast food value meal. So a $7 meal cost him $42.What young adults should do
Check your account balance first and then use your debit card. Better yet, use ATM of your bank and withdraw cash. Almost all banks let you withdraw free of charge as long as you use their ATMs. You can pay as much as $4 in fees if you get cash from an ATM that does not belong to your financial institution. -
Not taking responsibility for finances
What young adults normally do
Young adults like my son don’t do comparison shopping to find accounts that match their needs at the right cost. They don’t even check their bank statements or bills to find out any discrepancies so they can correct them as soon as possible.What young adults should do
Check your bank statements. Review all bills every month to avoid or fix mistakes. Keep copies of any contracts or other documents that describe your bank accounts, so you can refer to them in a dispute.
In a Nutshell
It’s your responsibility as a young adult to watch your expenses. Don’t be naive to eventually fill pockets of collection agencies. Take complete charge of your finances. Don’t get intimidated by sales pitches of any kind. Don’t get frustrated. Everyone makes mistakes. The important thing is to take action.
One Response to “How To Avoid Common Finance Mistakes Young Adults Make”
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