People learn by making mistakes. It is difficult to manage finances for those in their 30s because of the lack of experience. But as we all know, learning from other mistakes is much better, especially when it comes to money management. In this article, we gathered top 5 most common money mistakes all millennial should avoid.
1. Being unaware of your expenses
The importance of organizing your budget makes a lot of sense because not knowing where your money goes can result in overspending. People usually control their large expenses, like rent or bills. However, they have no idea how much exactly they spend on groceries, gas, and cloth shopping or eating out.
Yes, counting every dollar and tracking your daily costs can significantly influence your budget. One of the great money management strategies is using the 50-30-20 rule. Here is how it works: 50% of your paycheck goes to necessities like rent, car payments, and groceries; 30% - to your personal wishes (concert tickets, clothes, going out) and 20% - to cover your debts and make savings.
Certainly, not always this scheme works for everyone, but you can simply adjust this scheme according to your own monthly expenses. In case your budget goes out of control because of some unexpected costs, you can look for Canada pay day loans in Canada to make things easier.
2. Have no money for emergency
The best way of having one is making an emergency fund. If you always wanted one but never had a decent amount of money for an emergency, start saving at least $ 200-500 each month. That would enough to make a fund that is worth 3-6 months of your basic expenses.
The reality shows that unexpected costs are always there when you don’t expect them to be. Therefore, it’s important to have your own emergency fund instead of taking loans or borrowing money from your credit card.
3. Forget about your retirement fund
So, you probably haven’t really thought about retirement issues and if you actually did, you decided to take care of your retirement savings somewhere later. However, if you think about this kind of savings right now, it will bring you more benefits. Even if you start small and save a little, it will bring you more money over time thanks to a compound interest.
Many employers offer tax-free 401(k) retirement plans, so if you have that option at your job too, then you are lucky. In case your employer doesn’t offer one, sign up for Roth IRA – a tax-free individual retirement account.
4. Neglecting loan payments
Saving for your retirement and emergency is crucial for your financial stability but let’s not forget about the loans you can already be struggling with. If you neglect to do in-time student loan or loan payments, this can gradually lead you to a financial collapse.
Experts advise reaching your lenders personally in case you have issues with paying off the loan completely. If this is a federal loan, you may adjust your payments based on your income. In case you have a private loan, opt for loan refinancing to lower the interest rate and the amount of your monthly payment.
There is nothing scary to tell the lender that you have troubles paying the loan because he is the only one to help you here. One more tip: try to pay off loans with the higher interest first.
5. Have no control of your finances
You must understand that by ignoring bills and loan payments and by letting your financial issues drift as they are, you set yourself for something much worse than you may have right now. Don’t neglect spending another hour or so tocraft your budget and learn more about your savings and expenses.