Common Financial Mistakes South African Millennials Need to Avoid – What to KnowJanuary 31, 2020
Managing money can be quite a challenging and delicate balancing act. When it comes to finances, planning for your future, and at the same time, living the moment may seem diametrically opposed. Millennials are not the perfect examples when it comes to wealth management and financial planning. Studies show that about 80 per cent of millennials do not invest in the stock market, and mostly because of the lack of knowledge and money.
Many would say that the millennials were born with a “Peter Pan Syndrome”—a kind where they are so focused on their happy thoughts that they neglect to think about growing up and preparing for their future, especially from a financial aspect. However, even those with better education and proper knowledge are still not immune to financial mistakes, with some making them over and over again.
Here are some common financial mistakes millennials make that they need to avoid:
According to some surveys, only about ten per cent of millennials have the insurance coverage they need. It is important for South African millennials to get life insurance that is equivalent to the number of years they plan on working. They must also look into disability insurance that will cover them in cases of accidents that are not work-related. Ideally, millennials should get 30 times of their income in affordable insurance and ensure that the term insurance is convertible to a good permanent plan.
Inadequate or non-existent emergency funds
Emergencies can happen anytime, anywhere. It is crucial to keep a “rainy day fund” solely dedicated to emergency situations, such as medical expenses, economic unrest, natural disasters, or unemployment. Think of this as a way to reduce the need for additional debt. Make sure that the emergency or rainy day fund is kept in a separate account to avoid confusion or mixed-up with the other expenses like groceries or a next holiday.
If you do happen to find yourself in a situation where your emergency funds are insufficient, consider taking out a payday loan to get you through. Cash loans can help you meet urgent financial demands without landing you in too much debt. If you do choose to take this route, however, know that you will need to pay the amount back in a prompt manner, lest you find yourself with a hefty interest bill.
Having too many credit cards
Credit cards can be useful, especially if large purchases are made, but having too many is a major financial mistake. Store credit cards are so easy to acquire, and everyone is all faced with the temptations of using credit cards for most of their purchases. However, in spite of the short-term savings or financial benefits offered by opening a new line of credit, it is important to say no to more credit cards.
While using a credit card for purchases is a great way to earn points or rewards and offers additional protection against identity theft/fraud vs. using a debit card, it still requires personal restraint. You have to consistently pay off the entire balance every month for it to be effective. The best way to avoid this mistake is to find one or two cards that can be used responsibly to build up the credit score and get the perks.
Mortgage or rent payments normally claim a large chunk of South African salarymen’s budgets. After all, a home purchase is considered as one of the biggest investments one can make. However, in some cases, millennials take on housing mortgages or expenses that are more than what they can handle financially. Being practical and realistic about certain wants and needs when it comes to housing can help millennials determine the right percentage of their budget to allocate for their choice of home and still make sure that there is enough money left for some essentials and a bit of fun.
Despite making these mistakes, it is never too late to start working on tracking and managing finances appropriately. Avoiding these financial mistakes and looking for solutions can be a great springboard to building a more fruitful and better financial future.
If you’re looking for urgent cash loans in South Africa, get in touch with us today! We’re happy to help.