money-savings

Money Mistakes You Should Avoid for the Millenials

You’re fresh out of college and you’re excited if terrifyingly so for your first job. Welcome to the real world.

Gone are the days of cheap take out dinners, a room you share with others and insubstantial college income. You’re no longer working part time but full time expecting two paychecks that will make you small per month.

Adulthood doesn’t get any real as soon as you receive you first paycheck. You might already have planned out how you’ll spend every penny. You might even think you have a lot of money now. That may be true but it won’t go a long way unless you are smart about your money.

If you’re a millenial and hopes to achieve financial freedom along the way, here are money mistakes to avoid at all cost:

Not saving for an emergency fund

There is no better time to build an emergency fund, a fund reserve solely for unexpected expenses and emergency, than now. This fund also comes handy in case you lose your job, which you may not need to worry about yet. In any case, it pays to cover all your bases.

Stash away about 3 to 6 months worth of expenses to fall back on in case something happens. You can also start small if you think it difficult to squeeze in this habit at the moment. If you can only set aside 3% of your income per month, that’s a good enough start. The trick is to keep doing it month after month. A small amount can add up quickly over time.

Not paying yourself first

Other than the emergency fund, there’s another type of savings you should think about it. Decide how much you want to set aside per month for savings you can use for a variety of purposes. It can be for vacation, home or car down payment and many more. The trick is to pay yourself first meaning set aside the money first before anything else.

If you want to set aside 10% per month, set it up automatically. This way, it will be easier to save and work on what’s left of your paycheck after paying yourself first.

 

Not using your credit cards wisely

 

One of the most common and vicious downfalls for most consumers is credit card debt. With its high interest rate and promise of instant gratification, credit cards in most cases are disadvantageous unless you use it right.

When using credit cards, it’s very important not only to plan how you use it but also where you use it. Remember, credit cards are tools and not free money so put a tight reign on your usage if you want your finances in tip top shape.

Not taking investment risks

If financial freedom is what you’re really after, saving for the rainy day is not enough. You have inflation to think about and sadly, most savings accounts can barely catch up with it.

In order to make money work for you and not the other way around, investing your money is the key. You need an investment that will give you higher returns than what savings accounts can offer. In other words, you need to take risks in order to reap in returns.

When making major investments, the trick is to always make calculated risks. Take your time by knowing and studying your options. If necessary, seek professional financial advice to help get you started. Soon enough, you’ll be able to get the hang of things and you’ll have money working double time for you.

Boy saving money in a piggybank - isolated over a white background

How to Save More Money Quickly and Simply

If you already have savings but want to save more, there are simple and easy tricks to help you do just that. Below are some of the things you can do. Keep at it for an entire year and you’ll see that you’ll have stashed away more money than last year.

Make saving automatic

Saving when it has become a habit is as easy as ABC. If you’re struggling to make it a part of your lifestyle, you can set it up to be an automatic monthly affair. As soon as your paycheck comes in, let your bank deduct a certain percentage to set aside for savings. What’s left is for your monthly expenses.

Saving automatically sets you up for success. In essence, this is money you don’t see therefore making it easier for you to save in the end.

Eat healthy and at home

It’s also the best time to start eating healthy and at home. That means cutting down on take-outs and dining out. Start planning your meals and cook them at home. Bring your own lunch if you’re off to work. By simply doing this one change, you’ll be surprised at the amount of money you can save in a year. From groceries to medical bills, this move brims with savings potential.

Downgrade your phone plan

You might also want to consider downgrading your phone contract plan. If you’ve noticed your monthly bill getting out of hand and even if not, switching things up a bit can do wonders for your savings.

Rather than rely on your data plan all the time, take advantage of free Wi-Fi networks instead. You can also download money-saving apps to help you cut down your phone bill.

Eliminate unnecessary subscriptions

If you have a magazine subscription you don’t really fully maximize, unsubscribe as soon as you can and add the money to your savings account. Check your monthly expenses and eliminate unnecessary expenses. You might think everything’s necessary but think again. It pays to double check.

Use and bring cash all the time

If possible, use only cash when paying for something or buying things. While rather old fashioned, cash is a simple and effective reminder that you should put a tight reign on your spending. Cash offers you a tangible look of the amount of money you have as opposed to credit cards which encourages the constant quest for instant gratification.

moneybox

Understanding the Value of Money

If you want to get personal finance right, one of the best foundations you need to zero in first is to understand the value of money.

We live in a world where money is a necessity. It’s the currency of the world and either you’re good at handling yours or not. It’s either you’re letting money control you or you controlling money.

In any case, there’s no question to the fact that money is valuable yesterday, today and tomorrow. Other than letting you buy what you need and want, the weight of money’s importance in personal finance is in relation to time.

If you ask financial experts, they’d tell you that one of the most fundamental money principal is its time value. Put simply, the money you have today is worth more in the future when used wisely. In other words, if you invest your money today in a way that money starts working for you over time, a dollar today will be worth more in the future.

But before you do go ahead and invest your money, let’s first further illustrate what time value is. Let’s say for example that you are offered £10,000 now or £10,000 five years later. If you were like most people, you’d opt for the former option. After all, money today is always more enticing than waiting five years down the road.

For most people, receiving the £10,000 today is all about instant gratification. It’s free money they can use to shop or buy whatever they want. If you’re someone, however, who understands the time value of money, you’ll see that the same choice is correct simply because receiving the money gives you the advantage of time.

Disregarding inflation and other factors, now is better than later because you get the chance to let time work for you. You can invest the money so it earns interest over the course of five years thereby increasing the future value of your £10,000.

The trick, as you can see, is to invest the money. This is the one of the best and trusted ways to take advantage of the concept of time value for money. Based on the illustration above, money at its simplest is equal to time. It’s all a matter of making it all work for you. Calculate the time value of money and choose the right investments to make money work for you like a charm over time.