23 February 2017

Posted by Discount Insurance on Thursday, February 23, 2017
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Advice from Mum and Dad is something we carry with us like the bible in our minds. Being “conservative” with cash when you’re young is smart, for example, but millennials need risk to build long-term wealth.
As much as we trust the personal advice of these VIPs in our lives, could they perhaps be mistaken about money?

Here are three big financial misconceptions to watch out for.

  • Pay others before you pay yourself
Paying money you owe, like bills, when they are due is pretty much a no-brainer. If you don’t, your credit could suffer (which means you will suffer too when you aren’t approved for a loan).

However, it’s very different to pay other people for other things before you “pay yourself”. How can you save a little extra money each month if paying everyone is so important?

“At least after you’ve covered your debts, you should be paying yourself first, before you shell out on other spending” said David Bach, author of The Automatic Millionaire.

He suggests regularly moving approximately one hour a day of your pay, or approximately 12.5% of your pretax income, into an investment savings account.

  • You’re throwing away money on rent
Renting gives you flexibility as you pursue career advancement but it allows you to avoid certain financial drains. 

Aspiring homeowners tend to forget about the “add on” expenses of ownership, such as insurance, taxes, home maintenance and sometimes association costs.

Home maintenance expenses alone can cost anywhere from 1 to 4% of your home’s annual value each year. “People often say that buying a home was the best investment they ever made,” said Neela Hummel, of  financial planning firm Abacus Wealth Partners. “The problem is that their return as investors is often worse than they think.”

  • Avoid credit cards like the plague
“Many young adults are alarmed by how deeply in debt their parents became and don’t want to follow in their footsteps”, David Roberton, publisher of the Nilson Report, told the New York Times.
Establishing responsibility by opening a card early in life is still instrumental in building credit history. Good credit history means a good credit score, and that’s the springboard to obtaining loans for big ticket purchases, like homes.

Even if a home purchase is years away, building credit doesn’t happen overnight and having good credit is necessary to refinance a student loan or finance a car.

Discount Insurance provides millennials with competitive insurance to help protect their possessions. Give us a call on 0800 294 4522 for a quick quote today!