The coronavirus pandemic will most likely end up being one of the most difficult-yet-informative learning experiences in young people’s lives. Particularly for youngsters just entering the workforce or who have only done so recently.
Within months of the Covid-19 outbreak, entire industries have shut down and millions of jobs lost almost overnight in an attempt to stop the spread of the deadly disease. Besides the obvious health risks of this global pandemic, companies and countries have to tackle its severe economic consequences.
Rethink spending habits
Millennials who had just begun working or were barely a few years into their financial journeys are now facing salary cuts, job losses, furloughs and drastically-reduced savings. For many recent college graduates, the coronavirus pandemic has impacted their career plans and financial outlook.
As far as millennials are concerned, they need to be more cautious and concerned about their financial future, by having a robust roadmap of personal financial planning, in the face of the Covid-induced economic crisis. The on-and-off lockdown restrictions and the ambiguity around their lifting have forced most youngsters to pause and evaluate their lifestyle as well as spending habits.
Thanks to the coronavirus crisis, an entire generation that earlier believed in the buy-now-pay-later philosophy is suddenly thinking about saving for a rainy day.
Whether one is speaking about a youth who has recently graduated and was just beginning to get his/her career going or a young professional with a few years’ experience, it is always hard to keep track of personal finances. Some of the biggest mistakes are also the most common ones and can cost people heavily in the long term.
Most professionals in their twenties may have the feeling that their life has just got going. Therefore, they are too young to dwell or fret over monetary decisions and financial planning. When it comes to fiscal prudence, however, one is never too young or old to be money-wise. At this juncture, it’s important to recognise that the financial mistakes the youth make most of the times are done so unknowingly.
For instance, the judicious use of credit cards is not well understood by young professionals. Small purchasing decisions often end up in long-term problems simply because the dues were not cleared regularly. It’s prudent to keep repaying dues entirely with every spending cycle to avoid extra interest.
The other important aspect is being aware of your spending limit and the balance one has at any point in time. Not knowing how much one has spent earlier can easily lead to overspending.
Budgets and economising
There is another factor that can help minimise expenses that millennials typically overlook — creating and adhering to a monthly budget. Unlike earlier generations, carefree youngsters may end up spending their entire salaries. For such individuals, it is advisable to maintain a monthly expense register and then allocate fixed amounts for different expenses. This will help youngsters to understand the importance of personal financial management.
This will help in cutting down on discretionary spends. For example, one may have taken multiple subscriptions to periodicals and/or channels during good times. Yet, thanks to time constraints, one may not be reading or viewing some of them. Fiscal prudence requires that all unnecessary subscriptions should be cancelled or not renewed in the upcoming cycle.
Meanwhile, there may be those living in high-rental accommodations but are now working from home. In such cases, it makes sense to relocate to smaller flats or even return to their native place. Living with parents can immediately curb or eliminate multiple recurring expenses, including food as well as payment of monthly utility bills. Given the WFH regime, remote working from a more suitable and less expensive location is most practical.
Besides the above, setting aside money for emergencies ensures a person has a financial cushion for unexpected events or unforeseen expenses. Considering the current Covid-19 crisis, a healthcare exigency can occur at any time. Against this backdrop, fiscal wisdom can help people avoid adding to their outstanding dues.
Given the uncertain economic situation and the continuing volatility in market conditions, people need to take a close look at how the pandemic has affected (or will be affecting) them personally, professionally and financially.
Finally, young professionals must not hesitate in seeking financial advice from their seniors at work or elder family members, as they have good experience in personal financial planning. These people will be in a position to help guide them in managing their finances better during this uncertain and challenging time. During any financial crisis, one must always recall the adage: A penny saved is a penny earned.
The writer is CEO and Founder – mPokket