March 16, 2021
8 Financial Mistakes to Avoid in the Initial Stages of the Career
By : Ellie Brown
People don’t become financially educated after reading some books written by an 18th-century writer. The real-life experience of the latest time is more important since human civilisation is ever-evolving. Our lifestyle, dependency on technology, and spending habits change. Still, the mistakes are somewhat the same.
You can learn from the mistakes of others to avoid making a mess of the financial situations. Also, the advice from the people who have already faced the problem is extremely helpful to find a solution. Here, we have mentioned common financial mistakes people make in the initial stages of the career.
- Student Loan Debt
A student loan is one of the most sought-after financial aid that helps aspiring students. You will find many top-tier management people in the industry who have reached the position because of a student loan. However, its mismanagement can cause serious financial troubles during the whole repayment period.
A student loan covers every expense for students during their academic years. The loan amount will increase along with the total interest and instalments. Many borrowers realise their mistake once the repayment becomes unmanageable.
The solution here is to use the loan amount for essential expenses. You can reduce the loan amount by working parttime for regular expenses.
- Needless Shopping
Young people spend way too much on shopping, even with a smaller paycheque. The frequent visits to malls to add another piece of clothing in the closet doesn’t help your budget. Control your temptation and stick to the budget if you want to achieve the financial goals.
Start with reducing the visits to the stores and malls. Do not use the buy now an option on the shopping site to control impulse decisions. Moreover, do not fall for the sales pitch from the salesmen that can make unnecessary stuff sound essential.
- Credit Card Bills
Credit cards is one of the most common reasons for people falling into a cycle of bad debts. They make purchase ignoring the budget and the value of the product with the available credit in their pocket. The interest rates are unreasonable even with a small amount.
You should limit its use to emergencies only. Do not close the existing cards since the credit limit will be reduced. Moreover, it is simpler and inexpensive to take first direct loans with lower interest rates than the use of credit cards to get cash.
- Starting Too Late for Retirement Funds
Retirement seems like a future with decades to save money. It makes people procrastinate their fund throughout their 20s. In the 30s, you will have more expenses and gaols on the plate to cover the lost time. You will end up with an incredibly difficult task with very little time to complete.
Start early with the retirement fund if you want to achieve the goal without much trouble. Prioritise saving for retirement over long-term goals that include the dream car or college fees of your children.
- No Insurance Policies
An emergency can shrink your savings account and force you to take debts at exorbitant interest rates. It makes no sense to spend your hard-earned money on something that wealthy insurance companies can pay. You can buy an insurance policy through your Smartphone within a few minutes.
However, it is always recommended to research before buying a policy to save money. Do not forget to insure a car, house, and rental property apart from medical insurance.
- Living Paycheque-to-Paycheque
Start saving as soon as you land the first job and settle in the new place. The habit of living paycheque-to-paycheque can cause some serious financial distress in uncertain times such as unemployment. Therefore, an emergency fund with enough money to manage expenses for 3 months should be on your priority list.
Start with creating a budget with a considerable amount of money allocated to savings funds. Many people have successfully achieved financial goals with the 50/30/20 formula. Here, 50% of the income is spent on essentials, 30% on amenities, and 20% on savings and other financial goals.
- No Long-Term Goals
You need long-term goals to create a series of assets and save enough to live a comfortable life after retirement. They require consistent efforts for years if you want to achieve within the set timeline. Own a house, luxuries car, investment value, and retirement funds are some common long-term goals.
You need to keep the motivation high for the years to come. Set small milestones and reward yourself for achieving them on time. It will help you keep track of the goals while staying committed to the budget.
- Stuck at a Mediocre Job
It is okay to take a mediocre job to make ends meet for a few months. But keep the job search going if you want to achieve something great in the career. Many great talents are lost on the jobs for which they are overqualified.
To sum up, the early stages of your career will shape your financial wellbeing for the future. Your credit history, savings, and outcome of long-term goals are strongly dependent on the spending habit of your younger version. Therefore, act now on the financial condition instead of waiting for the right time to start.