At the beginning of 2000, science and technology were still the forte of the west. It is hardly the case 16 years later. The Internet piqued the interest of kids who jumped on the bandwagon of social media starting from Myspace and Orkut and have currently set up camp at Facebook, Snapchat and Instagram.
These very kids are now young adults and 20 to 30-somethings whom we call “Millennials”. They have been key witnesses to the paradigm shift in society from a traditional to a technological system and have had to be fast learners and early adopters to this new structure of existence.
We have learnt the art of living, the art of war, even the art of thinking clearly, but what about the art of managing money? Credit cards and online shopping alone have changed the way we spend money today. Money carries with itself not only purchasing power but the responsibility of management that even the millennials who have conquered every other form of advancement, have failed to combat efficiently.
So, here are some of the troubling concerns of money mismanagement among quite a number of millennials:
1. Being hooked on to credit cards
It comes as no surprise that millennials in Singapore love spending on fashion, the latest gadgets and cafe-hopping throughout the weekend. Furthermore, with online shopping gaining momentum throughout the world, millennials do not have to leave the comforts of their home and go to crowded malls to stay “on fleek” anymore. This lifestyle has only created a demand for a range of credit cards for millennials.
Banks in Singapore now offer millennial-focused credit cards such as cards with no income requirement for tertiary students or for young adults who have just started their careers earning an annual income of S$18,000.
For example, this year UOB launched a credit card called “UOB YOLO” to meet the demand of young adults. It offers dining deals, priority access to bars and rebates among other attractive benefits.
So, why would they refuse such a tempting offer? Millennials are used to consumerism and credit cards are there to lead the way. The S$500 credit limit on credit cards is not enough to dull their impulsive need to use their cards for partying, shopping, entertainment and everything else. Using credit cards makes spending oh-so-easy.
Tip: Use your credit card for basic necessities and maybe an occasional splurge until you earn enough to support the lifestyle you desire.
2. Rising debt dictated by drastic life choices
Taking an alternative career path is the “new” thing to do for the millennials of today. Back in the day, earning a decent income to support yourself and your family, getting a nice condo or a new car was what drove one to get a good job. Today, the scene is very much different. While it is good to follow your dreams and passion, sacrifices need to be made along the way.
Many millennials today want to pay for experiences rather than material things. They want to experiment and travel the world to gain valuable experiences before they retire. But what about the massive student loans, credit card bills and other responsibilities that have not yet been met? Travelling extensively, even on a budget, can be expensive. For most of us, travelling does not pay the bills, it does not help us buy our own house and it certainly does not get us out of debt.
Tip: If you want to choose the non-traditional path of travelling the world over your career, do so after you have cleared your debt and have saved for the trip. Or find ways to earn money while travelling. Don’t ever take a loan to travel, it will only increase your debt, one that you may not be able to repay.
3. Having unrealistic expectations on investment
A recent survey by Schroders concluded that the millennials in Singapore have “over-optimism” regarding their return on investment every year. Millennials expect a 9.6% return on their investment when compared to investors aged 36 and above who only expect an 8.9% return. Singaporean millennial investors often look at the short-term picture when it comes to investments and believe that they have a “higher-than-average” understanding of the investment business.
However, investment is not about the short-term return but carries a much larger picture if you want to look at a better return on your investment. Another survey commissioned by Manulife concluded that Singapore has the 3rd highest proportion of debt among investors where 1 in every 3 investors is in debt.
Being overconfident about investments and using it as an alternative to earning income from your job will only create an income shortfall and dig a debt hole where future investment might become a gamble rather than an opportunity.
Tip: You need to align your investment needs and projected return with the current Singapore investment market for a more realistic view on your return on investment.
4. Not paying bills on time
Waiting until you are slapped with the late payment fee on your bill is not the right way of paying your bills. Being forgetful, careless or simply having not cultivated the habit of making timely payments is no excuse for missing paying your bills.
In fact, banks have even made it simpler for Singaporeans to consolidate all their bills into a single credit card and make a single payment every month by using a balance transfer facility. This enables you to make a single payment every month, without missing payments and incurring late payment fees.
Tip: Set a reminder to pay your bills at the start of each month, or activate GIRO payments for bills such as mobile, conservancy fees, Internet, etc so that you don’t have to worry about due dates. Alternatively, use a balance transfer to consolidate all your bills at 0% interest for up to 1 year.
Read more about using balance transfer here.
5. Not saving enough for retirement
A “Youth and Consumption” survey that was conducted in 2014 concluded that Singaporean working adults confessed to not saving enough for their retirement needs. “Living in the now” seems to be what young adults abide by and spend most of their income in sustaining their lifestyles. They do not spend nearly enough time thinking about their future needs, especially post-retirement.
You cannot simply rely on CPF Retirement Schemes alone for your future, especially if you are looking to maintain your lifestyle. CPF retirement schemes are only meant to support your basic standard of living with payouts that will only start after you turn 65 years old
Tip: Save a portion of your monthly income in a separate account such as an SRS account every month, and do not use it for any other purpose other than to meet your retirement needs.
If you’re a millennial and can relate to any of the above, now’s the time to take control of your finances. Just like how you’re like a fish in water when it comes to tech and social media, you can be savvy with money management too. Don’t push something for tomorrow when you can start today.
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