There are a lot of people who believes they have a good handle on their finances but in reality, they still make money mistakes. It can be as small as a quick run to the grocery store and end up leaving with more brown bags than they can carry. It can be an impulsive or emotional purchase of a big ticket item that leaves them with a tight budget for years to come.
Mistakes happen but the idea is to have a solid basic understanding of the dos and don’ts to guide you along the way. If you already know that groceries account to most of consumer spending at 55% according to Gallup.com, then you should pay more attention to your list whenever you are out buying the groceries.
If you already know how your credit card usage will affect your finances, you would also be more vigilant with the way you swipe your card with your purchases. But these and a lot more does not come to you overnight. These are some of the things you learn overtime and experiences you learn from moving forward.
There are a lot of debt problems that could be pulling you down and money mistakes are best addressed early on in life. Young consumers who are just about to start life after college are the ones most prone to committing money mistakes. It is both the result of inexperience and being wide-eyed unsuspecting newbies that leads to making mistakes but this list can help point you in the right direction.
Money mistakes of young consumers
Here are some of the most common financial pitfalls young consumers tend to make. The sooner you know about them, the better you can prepare in addressing them.
- Missing payments right out the bat. Nerdwallet.com shared in a recent study that there are about 25% of US adults who does not pay their bills on time. This is something you need to correct early on in life because you have to develop the habit of meeting your financial obligations as they come. At a young age, you need to prioritize bill payments so you do not get behind and have to deal with charges and fees.
- Applying for credit cards one after the other. Having a credit card is important at this day and age and the way you use it reflects on your financial maturity as well. This is one of the early struggles young consumers deal with at the start of their financial journey. There are a lot of young people who are tempted to take out multiple card applications because there is a big chance they get approved for them. But what they do not know is for every application, the lender makes a hard inquiry on their credit score which dips the score significantly. Add the fact that the more cards a young person has, the more it gives them the false sense of entitlement to keep on spending money they do not have.
- Overlooking credit score review. One of the money mistakes young people especially fresh college graduates make is passing up the chance to review their credit score regularly. It might seem like a boring thing to do especially for young people but this is an important part of financial management. This is crucial to be able to catch any potential problems they might have such as identity theft or even being able to see where they can make adjustments to handle their finances better. They
- Staying away from credit altogether. Using credit and taking out loans are not all that bad. What makes it challenging for people is when they start to miss on their payments. You need to ensure that you prioritize repayment on your financial obligations so you can stay away from unnecessary fees and charges as well as improve your credit score along the way. Credit and debt are not all bad because there are some of them that helps you improve your financial standing and to a certain extent, your net worth. Take a look at your student loans for example where it has allowed you and numerous other people to take advantage of a higher education. That mortgage loan is also a great way to help you pay for your dream house bow rather than waiting to get all the money together.
- Agreeing to co-sign for a loan. There would be times when friends or family members would ask you to co-sign a loan so they can be approved for their application a lot faster. You need to think about this request very carefully because you are putting your own finances on the line for that loan. When the person asking you to co-sign the loan fails to meet the payment or ultimately bails out of the responsibility, you are just as liable as they are. That being said, you need to be very certain that you will not be putting your finances in jeopardy once you extend that assistance. If you are having any doubts, you better think twice and rethink that request.
Financial tips right after college
Now that you have an idea on some of the most money mistakes young people make early in the game, here are a few things you can
- Face your student loans head on. As soon as you finish college and start your journey on your own, one of the very first things you need to face head on would be your student loans. There are only a few percentage of graduates who are able to dodge student loans altogether but for the majority of students, it is a responsibility they have to carry for years to come. WSJ.com shares that the class of 2016 has an average of about $37,172 in student loans. This should be your first priority and continue chipping away at that amount until you pay it off.
- Get a good handle on your household budget. One of the things that will help you get a handle on your finances over the course of time. It is better to have an idea what you are working with when you start to look at your finances. How much money you have and how much you are spending gives you an overview on your financial activity. It also helps you tweak your earning and spending to help you achieve your long-term goals.
- Have long-term goals. You need to have long-term goals which will guide your present day actions. If your plan is to be able to save for a down payment on your dream house in 5 years then all your savings would go to that one goal. If you are trying to save up to be able to launch a business idea then work towards that goal. It is important to work towards a goal otherwise, you run the risk of running in all directions without any goal in mind.
There are a lot of money mistakes young people make and one of the best ways around it is to identify the most common pitfalls and stay away from them. It is a big help if you already know what to look out for so you know what to avoid.