Jakarta, CNBC Indonesia – Michela Allocca, a 28 year old financial advisor, reveals five financial mistakes that commonly occur in young people, more precisely those who have just got a job after graduating from college.
As reported by CNBC Make It, the author of a book entitled Break Your Budget is already famous for his work in helping the younger generation manage their finances. Allocca is also reported to have a total net worth of more than US$ 500 thousand or the equivalent of IDR 8 billion, this information was obtained by CNBC Make It through a number of his personal documents.
According to Allocca, the time when fresh graduates get jobs is a “strange” time. Because that's where these people feel confused about how to manage the salaries they get from their employers.
Here are five mistakes that you should be aware of if you are a fresh graduate.
Lifestyle inflation
This phenomenon is often referred to as lifestyle creep, but in general this is an event where a person's lifestyle expenses experience a significant increase when their income rises. It's no different from lifestyle inflation.
“This is a common thing, and it is very tempting of course to buy an item at a price that you cannot actually afford,” said Allocca, as quoted by CNBC Make It.
When this happens, it is very likely that the person concerned will take on debt in order to buy what they want. That's what makes them even further away from financial independence.
Save in a regular account
The second mistake Allocca pointed out was the unwillingness to place funds in instruments with high returns.
Just like in Indonesia, savings with high interest are generally offered by digital banks. And Allocca also recommends that young people save in instruments like that, rather than in large bank accounts.
“I call savings with high interest non-conventional savings. Because even though they can be accessed, your funds will be separated from your account for daily operations,” he continued.
Don't know where your money goes
“When you don't record your expenses, there is a 99.9% assumption that you have underestimated your expenses. It is very easy for anyone to justify their reasons for spending money, when you are not aware of how this can hurt your financial health,” he stressed.
Allocca advises young people to record their finances every week. Just allocate 10 minutes to check your expenses, because this is how you can determine what your expenses will be like next week.
Use the minimum payment facility when paying credit card bills
Credit cards have become quite a popular means of payment in the United States. At first glance, the minimum payment facility can help you with your personal financial cash flow, but make no mistake, this can result in your credit card debt never being paid off.
In the following month, the remaining bill you pay with this facility will be billed again plus interest from the bank concerned.
If done continuously, the interest burden that must be paid can become higher and your debt will become bigger.
Don't invest
“Even if you only invest US$ 5 a month, you are already doing something extraordinary,” said Allocca.
According to Allocca, investing at a young age certainly has many benefits, especially for your old age. Therefore, there is no need to delay this matter.
[Gambas:Video CNBC]
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