7 Crazy Financial Mistakes Young and High Paid Workers Make
The reality of life is that we are all human and as such, it is part of the learning process, as human beings, to make mistakes.
Generally, these mistakes are our teacher and help to broaden our experience. Making mistakes can be useful and, hopefully, the learning process teaches and reminds us not to make those mistakes again.
Examples of our mistakes are usually associated with poor judgments.
Generally, poor judgment occurs when we are offered a choice and because we lack the experience, common sense or give into pressures we select the wrong option.
Another such area that can create havoc in our current life and affect our future is when we are faced with financial choices.
This is especially true in our younger years when we make crazy financial mistakes. I’m not trying to make excuses here, but we’ve seen these happened to a lot of young and high paid professional athletes. I can name quite a few here, but I chose not to.
Without proper guidance, fame and money can be too overwhelming for them to handle. According to a Sports Illustrated report, about 70% of professional football players are under financial stress within only two years of retiring.
This problem is not exclusive to professional athletes. It can happen to anyone – young high paid workers and entrepreneurs alike.
Here are some of the biggest financial mistakes this particular group makes.
Partying too much
Like all things, if done in moderation, partying is a way of having fun, celebrating life and enjoying the company of friends. In fact, one should party when they are young, because, for the most part, they are carefree and have limited responsibilities.
Partying can be fun especially on weekends, but these young and high paid workers have to be aware of the pitfalls. We all love to take out time to catch some fun but when it gets to the extreme, you might actually be digging your financial ditch because however fun it seems, going out for a party would never cost you anything.
This one mistake could wreak your financial life because you will spend your time enriching owners of nightclubs and party organizers.
Another problem was when partying includes the use of recreational drugs and alcohol. Using one or both of these can be a formula for danger. This is because when the young person and young career individual indulges in this behavior, it may have significant repercussions on their future if harmful actions are taken while under the influence of these substances.
They shop ’til they drop
The term “shop till you drop” is often the compulsive action taken by young and old alike where they go to a mall or other retailer and just purchase all sorts of things.
This can be defined as unbridled shopping or indulging in the impulsive process. These things could be electronics, clothing, shoes, etc. The items could be a need but generally are a want.
Young high paid workers are also the most frequent visitors to Mall of America, King of Prussia, and Sawgrass Mills. While these shopping malls are excellent places, they could become problems too.
These high paid workers could easily get themselves into these crazy financial mistakes of shopping themselves into debts. We all want a lot of things, but we just cannot get them all no matter how much we have.
Financial prudence will require us to take an honest look at what we need instead of what we want.
Studies show that about 5 percent of Americans suffer from shopping addiction; defined as difficulty in controlling the urge to purchase.
Often indulging in this behavior is a significant financial mistake. First of all, they may be spending more money than they have and most likely are using their credit cards.
More importantly, compulsive shopping is a serious obsessive behavioral action that may be rooted in how they feel about themselves.
No set budgets
There is no easy way to fail than to start without planning. Financial experts and business leaders plan to reach lofty goals. If they do not do this, they will end up somewhere, but that would be a point where they least expected to be.
Blinded by affluence, young high paid workers easily ignore this financial rule and end up making yet another crazy financial mistake.
Making plans and setting a budget can increase our overall sense of composure and save us from unnecessary expenses.
A budget is a financial tool. This tool is then set up as a guide for us to stay within the parameters of this budget. This also a tool that will help us control our financials. We should stick to this budget as closely as possible, or we will go into debt.
It is important to remember that not only is this a tool, but this is a practical discipline that will help the young person towards financial solvency and will serve them well in their future financial situations.
Credit card abuse
With the advent of the internet, the magnitude of innovation in the world today is unprecedented, to say the least. In today’s day and age, it can be extremely easy to obtain a credit card from a credit card company.
Generally, the credit card companies entice the young person by saying they need to start building their credit for the future.
Our financial industry is not left behind. With the click of a button, you can buy items from Amazon and get them sent directly to your doorsteps in a trice.
However innovative and perfect all these seem with the ease they afford; the other side of the coin is just the opposite. With technology, young and high paid workers can make yet another crazy financial mistake.
These young and high paid workers seem to be the most vulnerable because of their love for tech and related devices. In the end, two or three clicks can put your account balance in the red.
Credit card abuse remains a problem that affects a lot of people and not just young high paid workers. If they are used responsibly, these credit cards can be their friends.
Co-signing for a friend
While cosigning for your friend may be a good way to give a helping hand, it is good to understand that you can bear the risk involved should your trustworthy friend in any way default the terms of the agreement.
Cosigning involves risk, and there are chances that the helper would become a victim.
The person you are cosigning for must be someone you trust to some extent. Young high paid workers can get into a situation where their friend’s credit is not enough to guarantee repayment of the loan in question.
If you notice any behavior that is working against your friend’s financial progress in any way. It might be to the best of his interest and yours as well to let him know and tackle it before cosigning for such a person.
Remember a cosign is like a bet with the financial institution to believe the contrary. It has to be done with care.
A typical example is if your friend wants to buy a car and they are either too young, don’t have the credit necessary, not enough income to qualify for the loan, poor credit history, etc. They can ask you as a friend or family member to co-sign on the loan.
This is a very nice gesture on your part. However, the legal ramifications are that if your friend or family member defaults on the loan, then the loan company or financial institution will come after you for payment of that loan because you co-signed.
In other words, you are securing the loan if that person defaults. This is extremely dangerous to take because it can have extremely negative repercussions on your credit history and your ability to receive credit in the future.
Buying expensive car
An additional crazy financial expenditure is for these high paid individuals to buy an expensive car. This is because cars are generally expensive even though the dealership might say that you can pay the loan for so many years.
It is important, however, to do the math prior to purchasing an expensive car. The fact that even though you may get a good deal and good interest rate, generally the loan is extended over a period of time that could range anywhere from 5 to 7 years.
A Lamborghini Aventador or Ferrari F12 are awesome cars, but you would never see Bill Gates or Jeff Bezos flaunting one of these. The most important thing about a car is mobility with comfort and security in the process.
Young high paid workers make one crazy financial mistake by spending stunning sums of money on expensive cars like those mentioned already.
Aside from the banal display of one’s financial power, many of less expensive cars out there can offer just everything you need for a good ride.
Throwing thousands or millions of dollars in cars would not increase your earnings. It would even cost you more just to maintain.
Also, it is important to know that the value of the automobile decreases dramatically once it is driven off of the car dealership lot. Its value will never be at the same level at which the car was purchased. Also, added to the mix is that an expensive car will require automobile insurance with the insurance for a more expensive car being higher.
Spending money on drugs
Finally, the craziest financial mistake that a young person can make is to spend their hard-earned money on drugs. First of all, if purchasing drugs, it is paramount to remember that in most states use of recreational drugs is illegal. Therefore, if the individual is caught and it is against the law, there are consequences.
Psychiatrists, social workers, and psychologist are part of the army of professionals on the ground to handle the growing number of mental health-related challenges in the United States.
Young and high paid workers constitute a high-risk sub-group of the major vulnerable group of young people in general.
Youths, a group to which young high paid workers belong easily choose to do it the opposite way, and the result is increasing expenses on drugs like cocaine and heroin and health problems resulting from addiction.
Whether you want to be more confident and effective at work or deal with stress, humiliation, and frustration, there is in fact, a normal way to go about these.
Mistakes are normal, especially for the young, but it is best to avoid them whenever and however possible. Financial mistakes are expensive and can take its toll not only on the young and high paid workers or any individual but the society.