Let’s face it, people of all ages make some really bad financial decisions. People in their 20’s make some horrible financial decisions. It’s a shame how much money is thrown into these purchases which don’t bring you any closer to financial freedom. I see these habits from friends, colleagues, family, and yes, even myself at times (it’s true). Your 20’s are not only about learning and experiencing, but they are about setting goals as well as a foundation to achieve financial freedom. Here are five purchases that I see on a regular basis from millennials that financially struggle.
1.Buying a brand new or expensive used car. There is no reason for a 24 year old to be driving a European sports car. Not only do you have to pay the expensive price tag, you have to fork up big bucks for insurance and maintenance issues. Cars are DEPRECIATING assets, and whether you make $30,000/yr or $130,000/yr, there is no reason to pick an investment where you can lose between 15-20%/yr. Buying a nice, professional used car, can save you time and extra money that you can spend on paying down high interest debt, or putting your money to work. Don’t be a fool, buy a used Prius like myself.
2. Spending money on things instead of experiences. I only buy things that will either increase my happiness level, or make my life easier while teaching myself something. The new iPhone 6, or the latest Fifa game will not make me smarter, and will probably make my life more complicated. I am more likely to spend two grand on a trip to a new country than spend $650 for the latest phone. I recently had a friend who bought three huge LCD TV’s during Black Friday because they were on sale. No comment. Not only does this type of behavior lead to being broke, it also leads to spending countless hours of doing nothing. Experiences are everything, material items will get you nowhere but into debt.
3. Shots. Late night meals. Shots. Everyone likes to have a good time, but there is absolutely no reason to spend $150 bucks every night of every weekend on booze, food, and Uber. Not only are you hurting your health, but more importantly, it is hurting your pockets, deeply. Just kidding, your health is more important, but still. I have friends who can barely afford their rent but refuse to give up their weekends of alcohol belligerence. If you have to start crowd funding your Uber ride home, there is a problem.
4. Buying all of your groceries at Whole Foods. Before I start, I will say that I love Whole Foods as a company. Have you ever met an unhappy employee? That being said, you can find organic, natural, and “healthy” foods almost anywhere now without having to pay premium prices. Shopping at Whole Foods for simple items such as milk, coffee, bread, and cheese will cost you almost double than your local discount store. Don’t even get me started on the juice prices. They would be better off changing their name to Whole Wallet.
5. Leasing anything besides an apartment. If you can’t afford to buy it, you shouldn’t be borrowing it for a fixed cost. The problem is that there are many sales people in several industries that will avoid telling you how much something costs, instead telling you how little you will have fork up monthly. Consumers end up missing the big picture on how much they are really paying for something or how much they will lose by having to return it after the lease term. Not only will you lose money at the end of your term, you will owe money for the wear and tear of the product. You are better off saving the money while having less distractions in your life.
I’m not saying that you should stop enjoying your life. The key is to set budgets for splurging so you can have money to spend elsewhere. Setting splurge budgets also lets you enjoy things more than usual when done in a lower capacity. Remember, the road to financial freedom isn’t easy, and it takes time to build good habits of spending. Just like anything else, once you start noticing your account balance increase, it becomes easier.