By Dominique Bowen
As Youth Month draws to a close, there’s an opportunity for millennials and gen-Zs to not only reap the rewards of smart financial choices informed by lessons learnt, but also steer themselves away from common money misdemeanours their bank accounts would rather forget. Below are some of them, and the better decisions to make in each scenario.
1. Getting into debt
On its own, getting into debt isn’t a mistake. But doing it without a plan or purpose can be reckless, not only for your current financial situation, but your reputation with future lenders. Terence Tobin, independent financial planner, money coach and owner of Rich Ideas Group, says: “Most banks give you 55 days interest free, so if you repay your outstanding balance in full at the end of the month, you incur no interest, and you start showing that you know how to use credit responsibly by using it and repaying it on a regular basis.” But you can burn your fingers playing with the seemingly abundant pot of funds that aren’t actually yours. And, if not nipped in the bud, this can lead to a debt spiral. It’s inevitable that credit will come into your financial picture at some point, whether you need to take out a student loan, or pay off a property or car. Responsibly managing a credit card can help you get there, as long as you understand how it works, and how to make it work for you – not the other way round.
2. Not starting to save early enough
“Why wait for tomorrow what you can have today?” Well, because we live in a world that satisfies our need for instant gratification. But saving gives you more tomorrow than what you can have today, and it’s never too early to take advantage of this gift to yourself. “It is never too late to start saving,” says Lloyd Ellis, independent financial planner at Solutions 2 Wealth. “It can, however, be very late to start saving, but better to save than never at all.” Get into the habit of deciding on a portion of your weekend job or student gig that you’ll put away every time you receive your salary or wage. This will not only help you physically save money, but you’ll become used to ‘parting’ with money that you would otherwise spend, and watch it grow over time. Then, when you earn your first real salary, continue the habit. “What I’ve found is that when young people have implemented this, the habit benefits them for decades to come as the magic of compounding works in their favour,” says Tobin.
3. Giving in to peer pressure
Traditionally the term “peer pressure” has referred to our comparison of ourselves to family and friends, but social media has caused that net to be cast much wider. There are more people to level up to. And yet there aren’t if you stick to your goals, stay focused and remember that only you have yourself to answer to years down the line when you reflect on your successes. There will always be friends or colleagues who have a more comfortable financial situation than you, and coming to peace with that will starve that comparison gremlin that’s been stealing your joy and spending your money unnecessarily. The only “peer” you need to allow to influence your financial plan outside of your partner and family members is a qualified expert. Speaking to one can help you get on track to your unique goals and make them a reality.
4. Not considering disability cover
Life, as you know, isn’t guaranteed tomorrow, and this doesn’t become any less real the moment you start earning an income. The financial consequences can be tragic if you’ve worked your way through school and studies, secured your first job, and it gets swiped out from underneath you as a result of disability. “Immediately once you’ve found or created your own employment, consider an income protection benefit,” says Tobin. “It’s important that your current standard of living is maintained should something happen to you, as that can provide you with a great sense of financial security, mental stability and wellbeing too, knowing that if an event occurred of a medical nature, you wouldn’t suffer financially.”
Common thread
What links all of these points? They’re motivated by living in the here and now, not worrying (or for some, even thinking) about tomorrow. They’re all mistakes motivated or incentivised by our frenemies YOLO (you only live once) and FOMO (fear of missing out); the first will tell you to throw caution to the wind and ‘just buy the shoes’, while the other can’t stand the thought of you missing out on the latest phone upgrade.
Some financial lessons are learnt the hard way, but adjusting your attitude to life overall can mean the difference between getting stuck in a financial rut before you’ve reached your 30s, and celebrating your successes for many years to come.
PERSONAL FINANCE