In part One of Young with Big Bills? 12 Money Mistakes That Leave You Broke II, I discussed the money mistakes that take the cash out of your purse. Here is a continuation of the article.
A misconception that you need to earn a lot of money before investing or saving.
A lot of people fail to make investments or save because they feel they don’t earn enough or don’t have enough. What they don’t realize is that it is best to start small, start early but most importantly start now. There would never be a better time to invest or save.
Failing to set financial goals & developing plans.
Young people do not set financial goals. If you fail to plan, you plan to fail. Goals should be Specific, Measurable, Achievable, Realistic and Time-bound (SMART).
Living pay check to pay check.
A lot of young people live from pay check to pay check. Before the end of the month, they are broke and have to borrow to make ends meet and once their next paycheck comes, they are paying off debt from the previous month and the cycle continues.
Leaning too much on parents.
A lot of young people depend on their parents for everything. They don’t know how to create wealth on their own and cannot survive without their parents. It is best to “leave the nest” early on in life. If you wait, you may never be able to do so.
Failure to plan for the future.
A lot of young people fail to plan for the future. They don’t start planning for retirement or partake in estate planning in their early years.
Not paying yourself a salary.
Young people should consider paying themselves by saving. Savings should be perceived as paying yourself a salary or paying yourself first. Furthermore, entrepreneurs should put themselves on a salary so that they do not hinder the growth of the company by dipping into companies’ cash flow.
Advice to young people.
Have clear goals and a plan: It is reported that a study was done at Yale. According to the study, only 3% of a graduating class had clear written goals. 20 years after the same 3% were earning ten times more than the 97% who didn’t have written goals.
Financial planning: Know where you are financially. Details on how to do this are on the blog. Set goals, develop plans, keep records, and review progress periodically.
For married couples: Set up a joint savings plan, kids’ education fund, retirement plan, estate plan, budget etc
Cut your coat according to your material and not your size: Learn to live within your means. If you have investments and savings, then, by all means, buy what you like, however, if you can’t afford it, instead of borrowing, save towards it. There is a time for everything.
Before buying anything ask yourself “is it a need or a want”.