We measure ourselves against our peers, probably in more ways than we can count. However comparing each other financially seems to stick out among the rest, whether it be cars, houses, vacations, you name it.
It’s unbelievably easy to make one’s life look amazing through the power of social media, and it can really create a distorted reality for young folks such as us to chase.
As you have and will see in the future, these articles will be more about the things that actually matter. Enjoying and appreciating your life is so much more important than worrying about the little things and what other people are doing.
Now, stay tuned as here are 5 mistakes you need to avoid if you want to make your life better and grow your net worth.
1. Lifestyle Inflation
This is EXTREMELY hard not to do. Even as a personal finance blogger, I’ve noticed I sometimes I consider things I would never have touched a few years ago as my income has increased.
Now most of us have big goals, whether it be to pay off our student loans, build a business or any other number of things that you’re focusing on. Eventually, though, you WILL get to the point where more money is freed up and rolls on in because of your hard work.
It’s a great feeling, but if you let your lifestyle creep up at the same (yet often times faster) pace than your success… you will still be broke. Have the urge to not suddenly up your lifestyle when you get a bonus or a big raise. Instead, put all or most of that money away for the future. If you were doing fine before, it’s not like you HAVE to get a brand new car or those $300 pairs of shoes.
2. Not Actively Tracking Your Money
If you don’t do anything else on this list, or if you got bored and don’t want to read anymore, you need to make sure you actually keep track of your money in real time and see how your day to day decisions affect your net worth.
There are so many good financial apps out there now, you can go crazy and get them all. Some of the favorites I’ve looked at through are Mint, Personal Capital or just using an excel spreadsheet. Push yourself to get more comfortable looking at your net worth – even if it’s still negative right now.
3. Financing Depreciating Assets
I’m not kidding.
According to Cars.com, the average new car price in 2017 AFTER incentives is $31,400.
Now, let’s pair that with a Polk study done in 2012 that predicts Americans on average will buy nine cars over their lifetime.
These are obviously rough numbers and there are a ton of variables to consider (we aren’t even adding in interest paid over that span of time or future inflation), but 9 x $31,400 = $282,600.
That’s over a quarter of a million dollars spent per person on something that is best known for being worth less than what you paid for them. Is that crazy or is it just me? Even if you spend half of that on cars, you could have at least $125,000 more during retirement. Talk to any retired person, and I guarantee that they would love to have an extra $125k laying around.
4. Sticking With One Stream of Income
Creating multiple income streams is a great way to increase your net worth AND help you sleep better at night.
These new streams of income are basically a form of insurance. You never know when your company might have to cut back or if you decide you want to change jobs. It’s life, these things do happen.
And no, your new income streams don’t have to be anything complex. It could something as simple as running a blog like this, or creating new punny greeting cards and selling them on Etsy.
There aren’t many excuses for us millennials to not be out there trying something.
5. Waiting to Plan For Retirement
This is one of those things a lot of millennials are struggling with right now and don’t even know it. Being young is great because we still have that awesome metabolism, we can run fast and still jump semi-high, but one of those disadvantages is that we don’t truly understand the concept of time and how quickly it will pass over the next 20 to 30 years.
Every person I’ve talked to over the age of 50 wishes that they had started saving for retirement earlier. Every. Single. One.
Even if you have other goals you’re focused on that’s fine. But you should also be developing a strategy for when and how you want to retire, and how you plan to get there.
Short and sweet right? Are you still with me?
Please get started today. You’ll thank me later.
Good Luck, Newbies