If you are one of the millennials or “the youth of this generation”, there is a high probability that you are financially screwed. This might seem as a broad generalisation but let me show how! Firstly, we were never ever taught about financial education in our schools and just to add the cherry on the cake, we live in an era where we have rising cost of living! All these factors are bound to keep us broke if we continue at the pace of our previous generations. After putting that immense effort to reach where you are today and what you earn, you do feel like spending that hard-earned money to comfort and pamper yourself. This way we end up in a rat race where we pay for the bills and other odd expenses that do not pay back to us. About 78% of the Americans live pay check to pay check and about 50% of the Americans have less than $60000 in their savings when they retire. This clearly depicts quite a moderate and a generalised lifestyle bound by the shackles of limited money!
This way you are going to need some extra money to pay for some unforeseen circumstances. But how are you going to arrange for that? Now here comes your disguised lifesaver, your BANK! This is the only institution that’s ready to pay for you even if you don’t have the paying capacity for that expense. You might be idolising the bank as the next God, but beware! No one’s going to pay for your expenses ever. The banks surely will lend you some extra money but not for free! Here’s the catch, you might end up paying an additional hefty interest on the sum you borrowed. This cycle continues each month.
Now this does seem like a rat race. We end up coming back to the square one, working day and night, trying to make the both ends meet. And what are we actually left in hand after that, A RECURRING DEBT! Instead of having that money work for us, we now owe the same money to our bank. Spending over the luxuries should never be the mindset of the youth. It is basically that budding stage where the financial barriers could be broken and a financial independence could be shaped for the life ahead.
A Gucci or an Armani shirt will undoubtedly look astounding but here it is going to leave a severe dent altogether on your pocket. The key for financial freedom is REDUCING EXPENSES AND INVESTING CONSISTENTLY! This will simultaneously make the money work for you and pay for your unforeseen circumstances. Instead of lending money from bank, lend the money to the companies in the form of stocks. This way you not only get the advantage of the rising prices of the stocks primarily due to the forces of demand and supply but these companies too pay you an interest in the form of the dividend for investing your money with them!
Now what the youth needs to understand is, a dinner at a fancy restaurant or any sort of luxury would eventually lose its value but what is going to add up to their wealth is the money that they are going to invest either in financial instruments or in developing a new skill set within themselves. If the millennials steer away from this life-skill of making the right investments and adding up the value, the age long trap is still wide open to welcome future generations as well!