Esther EluemeBY the end of this year, the first set of millennials or Generation Y, those born between 1981 and 1996, should be in the age range of 25 and 40.
According to recent financial statistics from the Bank of America, only 27% of millennials in America are not saving long-term. For Nigeria, financial statistics from the DMO and the banking sector show that 73% of the millennials are not saving at all, and are currently facing some of the most uncertain and difficult financial times of their lives.
Whether you are already on a right track financially or just starting out, it is advisable to first have plans you can work within the place. You can adjust them as you move on.
Here are 5 financial debt traps to look out for as millennials:
Trap 1. The ‘Get Rich Quick’ Narrative.
There are so many get rich quick schemes floating all over social and regular media. You hear things like, “Invest a minimum of N100,000 and get 20% ROI in two weeks.” Imagine the magic. Even if you’re the owner of CBN. Avoid this type of scheme as many are already bankrupt and yet to recover from the popular ‘MMM’ Ponzi scheme. These fraudsters know that for a densely populated country like Nigeria with rising poverty levels, the get-rich-quick schemes are the quickest and easiest way to swindle the ignorant.
Trap 2. Short – Term Vs. Long-Term Planning.
Except you are only saving to solve an immediate need, always plan a long-term investment for all your financial goals. It is very tempting to just quickly plan something and start getting the results almost immediately. For any wealth that must last and outlive you, this model cannot pass. In fact, it has never worked anywhere. All your goals must be tied around a long-term plan for it to last.
Trap 3. Zero Savings Plan.
There are three types of savings that you must consider as a millennial – Savings – For solving immediate needs like school or school fees, buying a house or paying rents, buying a car. Emergency – This is for fall back incase you have no job or source of incomes for a while, for medicals too. Retirement – When you retire from active service this type helps keeps you going. It is highly encouraged. Maximize the pension scheme and personal pension scheme. Stop trying to avoid remitting your pension funds.
Sadly, most millennials are not saving for their ‘night’ days. This is a big pothole, and a disaster waiting to happen, if not corrected. Frankly too, most just dump all their savings in bank accounts without proper guidance. They do not know about high-yield savings accounts yet. They still use the same standard savings account at a local or national bank with about 0.09% interest, not realizing they could be earning more interest, with the help of a financial advisor, somewhere else.
High-interest-rate savings accounts, like fixed and forex trading, offer more than twice the average interest rate of a regular savings account.
Trap 4. Living Above Your Income.
This is about the biggest financial death trap. You must watch and balance your income and expenditure if you will stay financially afloat, meeting all your little obligations as a millennial. It’s very tempting to want to buy everything that catches your fancy. Live within your limits. Your children do not need to attend some of the big schools with their lowest fee going for N150,000 if your monthly income is N100k or below. You don’t have to live in a two- or three-bedroom apartment if you earn less than N350k a month. It’s suicidal.
Trap 5. Living Without a Budget.
Creating a budget means that you need to understand how to split your finances. If you have been spending at or above your income level through your 20s and 30s, now is the time to break that habit. All your spending must be budgeted for.
Plan your expenses based on your take-home/net (post-tax) or profit, monthly. This will allow you to accurately determine what the most important things are, and you can strike out the unnecessary ones. This is a bit tricky when you are not used to it. With consistency and determination, you’ll see how helpful it is, and you become more prudent and saving more.
My advice would be to bucketize your expenses into: (1). Essentials (bills, utilities, housing, foods, daily consumables). (2). Savings (emergency fund, retirement, house, wedding) — automate this part. (3). Fun (travel, dining out, etc.).
When you watch out and avoid these financial don’ts and death traps, you will find out that your life starts becoming financially manageable and you’d be glad you did.
Often, simply writing down your actual goals in life could be a game-changer and lifesaver. While at it, be sure to behave your ‘google spyglasses’ on to help you identify the many financial mines and death traps all around.
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