The young professionals who have just completed their studies and started their professional life are used to be on cloud nine. First of all, they just have started earning a handsome amount of money which is much more than what they used to have as their pocket money. Along with that, they have almost NIL responsibilities. This makes them spend unnecessarily. The experts on personal finance quote that this is the best period of time when one can build the base of a healthy financial life. But unfortunately, most of our young professionals don’t care about the financial affairs which they are going through.
Most of the professionals who are in their 20’s have a feeling that life has just started and they are too young to dwell on financial decisions and plannings. But this attitude towards money is the evil which drags young professionals to a trembling financial life in the future.
However, there are ways how a young professional can avoid financial mistakes and enjoy a healthy financial life. The most important is to recognize the mistakes as most of the times the youth make financial mistakes unknowingly.
Listed below are 10 Common Financial Mistakes Young Professionals Make in their early financial life.
# Mistake No 10
Not Making A Budget
Budget making is the first lesson on personal finance and sadly most of the young professionals are lacking in the same and don’t make a budget for their expenses. An ideal budget tells us how we should spend our money instead of wondering where it has gone. This means we have to make our budget at the starting of the month and spent accordingly. A budget is the best tool to get a control over personal finance.
# Mistake No 9
Being A Victim Of Debt
Debts are indeed very tempting and the present day lenders represent debts in a very attractive way that it looks like a gift only. Such are the marketing strategies of the lender and youth are the most targeted ones as they fall into those traps very easily. Being a debt trapped in the initial stage of earning is a sign of weak financial life in days to come. Availing unnecessary credit is one of the financial mistakes which every young professional should avoid.
# Mistake No 8
Paying Your Full Rent
House rent is counted in one of the biggest monthly expenses of any individual. When you are staying alone in a city, you can share your house with your friends or colleagues which will be helpful in paying the rent of the house. If the rent is shared by two or three members, everyone will have to pay a small amount and it would be easy on the pocket. Some of the youth live alone in their house or apartment for more privacy but remember that your privacy is getting too expensive.
# Mistake No 7
Ignoring Small Expenses
When most of the youth are not taking interest in personal finance itself, then expecting them to take a note of small expenditure is maybe meaningless. But these small expenditures which they keep on making, thinking that ‘small amounts will not bring a great change’ is the biggest mistake they make. If you make a youth add up all the small expenditures he/she has made in last week, I am sure that they will be shocked by the amount. Such small but continuous expenditures are the hidden enemies who keep on hitting our wallet without our knowledge.
# Mistake No 6
No Financial Goal
Financial goals are something which should be made on the day when you get your first salary. No one can reach anywhere or any achievement cannot be done if you don’t know where you have to go or where you want to be after a certain span of time. Financial goals can be of different kinds such as having a particular amount of money in my bank account by this time, owning my personal home, buying a car without any bank finance, gifting a foreign tour to parents and many more. If you are without a financial goal then you are once again making a mistake.
# Mistake No 5
Investing In Depreciating Assets
Assets are of two kinds, appreciating and depreciating. Most of the youths are found to be interested in depreciating assets like cars, bikes, costly gadgets, expensive dresses etc. Owning such assets are undoubtedly exciting but this is a loss of opportunity which has been done. Instead of those things if the same amount is invested in appreciating assets like gold, land, securities, and bonds then your money would come back to you with the interest amount.
# Mistake No 4
Lack Of Savings And Investing
Rarely a youth can be found who is interested in savings and investing. When you are earning a good amount of money and you are free from responsibilities, it becomes the best time to invest. In the later period of life, you may earn more but your responsibilities and financial liabilities will also be increased. So hit the iron when it is hot and start saving and investing in fulfilling your financial goals.
# Mistake No 3
Making Mistakes On Income Tax
Filing income tax seems to be difficult for many youth professional and they make various mistakes which come hunting them in the future. Not showing your income or investment properly creates lots of hotchpotch while filing for returns of income tax. Moreover, if you miss filing your income tax returns in the current year, you would not be able to file in the next year. Additionally, the taxation rules also keep on changing which you are to be updated with. Ignoring taxation is a very common mistake done by youth professionals.
# Mistake No 2
Misunderstanding Credit Cards
Credit card and youth professional are like inseparable. The credit card provider companies do a research to find out the youth professionals and keep on making calls or mail them providing free credit cards with offers. Youths take credit cards very lightly and keep on using them at any purpose. Using a credit card is actually very costly if you are not paying the whole amount in the coming month. Along with that, it drops your credit score too. Having a credit card is never a bad practice but using the same in a less meaningful way is a notable mistake of present youths.
# Mistake No 1
Spending More Than You Earn
In the countdown of the top 10 mistakes financial, the first and of course the most widely made financial mistake of youth is “Spending more than they earn”. Such expenditures are the reason for being loaded with debts at the end of every month. When you lack a monthly expenditure planner or a budget, you keep on spending and at the end of the month, your bank account balance enquiry shows with two digit number which is really depressing. To fight the cash crunch either you take help of your credit card or you go for a credit from your friends. Sadly, both are harmful to a healthy financial life. So, be cautious and avoid such situation by being financially disciplined.