Managing your money is never easy. But it can be even more difficult if you’re not being smart about handling your finances. And while there are many ways to make mistakes with money, here are five mistakes that I believe are especially common among millennials:
Reviewing your expenses is a great way to identify where you can cut back on spending. You can also use it as an opportunity to find ways to make extra money.
You want to do this with each and every category of expenses in your budget: housing, food/drink, transportation/travel/entertainment, utilities (electricity etc), insurance and misc purchases like household goods like cleaning products or toilet paper – everything!
A good rule of thumb is to have 3-6 months’ worth of living expenses saved up so that you can weather any unexpected financial setbacks and still pay your bills. This could include having enough cash on hand to cover a major car repair, job loss or medical emergency, or even just being able to help out a family member who needs it (just try not to let that happen).
You can use your credit card to earn rewards, which can be used for all sorts of things. Use your credit card to pay off debt. Use it as a travel tool. Use it for school expenses or groceries—anything you want! There are some advantages to using a debit card as well. For instance, when you use a debit card from SoFi, “college students can earn up to $30 just for signing up and using their debit card.”
Rewards are typically free money that’s deposited into your bank account after spending a certain amount on the card each month—but not all cards have them, so make sure you check before signing up if this is something that interests you.
Spending more than you earn is a sure way to get into debt. A simple rule while you create a plan for money management as a student is—if you can’t afford it, don’t buy it. That’s the most important rule in money management. It’s also one of the hardest ones to follow because there are so many things we want that we can’t have—but if we’re not careful, all those wants will turn into needs eventually and before we know it our lives will be full of obligations instead of fun experiences.
You don’t need to pay off your debt right away. It’s good to have a little bit of debt on hand. First, the interest rates you’ll be paying on your debts are likely much higher than what you’re earning on your investments. Second, if you always pay down your debts before investing in other things, then investment funds will be going into paying off those debts instead of being saved for retirement or other purposes.
If it feels like you’re always in a rush to get out of debt, slow down. You may be tempted to use credit cards or loans to pay off your debt faster, but these options are often more costly than you think. Instead, take your time and focus on making smart money decisions that will improve your finances over time—and keep them there for good!