By Faria Ahmed
From being called ‘entitled’, ‘impractical’ to ‘lazy’, we millennials have been called everything in the spectrum that defines financial recklessness. Interestingly, an article by CNBC reported that Millennials actually have similar spending habits when compared to their previous generations, but it is their lower income that starts them off as poorer adults. Another report explains how most millenials came of age during the financial depression, started off with large amounts of student debt, and/or are dealing with higher housing costs than any of their predecessors. That often forces them to lean on credit cards to meet essential needs and deal with sudden emergencies. And thus we fall into a vicious cycle of debt and compound interest. As bad a hand as we have been dealt, the only way forward is to be extra cautious and assertive when it comes to dealing with finances. Here are the top financial lessons I have had throughout my 20s:
Income: The math of financial stability is quite simple. More money coming in compared to money going out will lead to greater stability. If the reverse is true, you will begin to submerge in debt unless you make some drastic changes to prevent it. It is difficult to maintain a decent income when you are in school or just starting off your career. However, I personally found a few tricks which I think helps to solve the problem. Firstly, I would recommend working full-time for the summer (or other vacations) from the first year of university (if not sooner). If you work through the breaks during high school and university, you should be able to build up a solid savings account before you even move out from your parent’s home. If you are living on your own, try to keep an evening and weekend job which will keep a steady flow of cash coming in while you finish school or begin your day-time job/internship. If you have an interesting hobby or a skill, see if you can sell some of your creations or earn some cash by doing performances at events. It’s a great experience and it is also an amazing feeling to be appreciated through remuneration for a skill you have developed out of passion.
Banking: Money comes and money goes. Especially for cash, I always felt that keeping track of it and the loose change it acquires can be difficult. The minute I break a big note, I feel like the value of the coins pretty much disappears into thin air. I also end up spending more when I’m buying something and the vendor doesn’t have change on them. For that reason, banking and using a debit card is an excellent solution to the problem. The only thing to keep in mind is that the use of the debit card itself should not be adding to your cost. So, make sure to check out the bank you use and make sure there is an unlimited number of transactions that you can do with the debit card without acquiring more fees.
Investments: I’m personally not a huge fan of investments, but let me try to give it a fair shot here. If you do actually have a decent amount of savings sitting somewhere, and you don’t need to dip into it for emergencies and daily expenses in the next year or two, you may want to consider investing. You can invest in your country’s local stock market or even in a business venture which you think has potential. The reason I’m not a fan of investment is the high risk that is associated with it. For someone who is a serial entrepreneur, I am surprisingly scared of large, risky investments. The other reason I don’t invest is that I don’t understand the factors influencing the stock market where I live now. This means I may not be able to safely predict risk periods and falling values and end up losing money. However, if you are someone that enjoys staying up to date on social, political and economic issues and your instincts about rising or falling stock values have been correct the last few times, it may not be a terible idea to invest.
Assets: The other type of investment, and one that I personally prefer, is investing in assets. This can be a car or a home or a piece of land. Ideally something that goes up in value (unlike a car which actually falls in value over time). You can put your money in silver, gold, real estate and many other options. Some people even invest in paintings or rare coins- but again the market for those are way more complex and dependent on your understanding of the industry at a given point of time.
Lifestyle Choices: Having been a shopaholic, a creative interior designer and in general a capitalist for the major part of my life, I think it is important to consider the lifestyle choices we are willing to make or give up, in order to achieve financial stability. I personally do not have a fasication for expensive/branded clothing, jewelry, perfumes, watches or bags. That in itself allows me to save tons of money which I then spend on my essentials and a little bit on my passion for travelling. Even if you do have an expensive hobby or passion, there’s always ways to get around without spending a large amount of money. Instead of staying at hotels and taking guided tours, you can go backpacking across continents, live in hostels or with friends, plan your trip to the last bit to avoid unexpected costs and so on. Having said that, we all do need to live a little in our 20s. It is a precious time when we have high energy and our youth allows us to push ourselves to the maximum of enjoyment and learning. So long as you can cut back on some unnecessary expenses and avoid debt, go and do what your heart truly desires. Work some extra weekends and save up for that trip to Disney World or save all your Christmas or Eid gift money so you can finally buy yourself the latest gadget.
That’s it right there. My top 5 suggestions to improve the relationship between us millenials and our financial goals.