4 Money Mistakes that Youngsters Make

Life as a youngster in your first or second job, without any responsibilities, is a carefree period but has its potential pitfalls. These are 4 mistakes that youngsters commit often and then repent. Guard yourself against these mistakes by being proactive.

Buy, buy, buy

“If you buy things that you do not need, very soon you will have to sell things you need “

Warren Buffet.

With the increasing penetration of internet, especially through smartphones, youngsters today are exposed to a lot of opportunities to splurge money. Be it the latest gadget or the trendsetting clothes or the most electronic accessories, youngsters make the mistake of spending a lot of their money on these luxury items. In their greed for instant gratification, they end up buying stuff that they may not actually need, but only buy out of impulse. Make sure you are out of the ‘materialistic acquisitions rat race’ before it turns you into a greedy rat. Buy the latest smartphones after 6 months. It’ll still have the same features as today, but at a lesser cost.

Over-burdened with debts

A direct consequence of blind buying is that you may end up with having to spend a lot on debt-servicing. Excessive spending will entail excessive borrowing. This will result in your income being spent a lot on servicing the debts through EMI’s. This will lead to a spiralling cycle of debt wherein you take more debt to finance the earlier debt. Stay out of this spiral. Take on the responsibility of a new debt only when the old ones are cleared. Don’t let debt-servicing be more than 10-12% of your income.

Not having critical illness insurance

Never heard the word ‘critical illness insurance’ before? Not your fault. A lot of 20-somethings consider themselves immune to most critical illness. Attribute it to the high-testosterone thought process or the devil-may-care approach to life. Critical illnesses can strike you anytime and anywhere. Critical illness cover, like Edelweiss Tokio Life CritiCare+ gives you a lumpsum payment on the diagnosis of an enlisted critical illness. So, for instance, if you go for a vacation and suffer a burn injury, you may be required to take time off from work which may not be compensated by your employer. In this scenario, the critical illness Sum Assured will help you in meeting your bills, paying off your EMI’s etc. The younger you are, the cheaper it is for you to buy critical illness cover.

Not having enough life insurance

Even if you don’t have a family or a house, you may have a co-borrower to a loan that you may be part of. So, for instance, you take a home loan with your father as the co-borrower. If you meet with an untimely demise, the entire burden of the home loan may fall on him. In such circumstances, if you have life insurance, things will be a little easier for him. Take a term insurance plan like Edelweiss Tokio Life MyLife+. The younger you are, the cheaper the premium. Lock in a term protection plan at a cheaper premium and pray that your family does not need it ever.

Conclusion

Like someone one said, ‘making mistakes when you are young is bad, but at least unlike later in life, you still have time to correct them.