Let’s face it, times are tough these days. It’s getting harder for us millennials to find work in our field, and many college graduates are struggling to make ends meet. On top of that, millennials are bombarded with constant marketing messages to spend money on this and try that… it never ends!
Despite all of the problems we face as consumers, Millennials are still prone to making one crippling money mistake. Are you guilty of it? Read on!
Just imagine for a moment a man named Steve. Steve just graduated college with an art degree and is working a part-time job making ten bucks an hour at Lowes to help pay off his student loan debt until he can land his dream job.
Not bad for a college student, but could be better for a graduate.
Now, let’s pretend that Steve finally managed to get a decent paying job in his field. Now, he’s making $17 bucks per hour. Huge step up, right?
He’s almost making double what he used to.
So, what does Steve do? Well, Steve does the exact opposite of what millennials should be doing upon receiving a raise: Spend More!
The Big Mistake
That’s right ladies and gentleman.
The biggest mistake I see millennials make when they land a new, high-paying job is spending more!
If you think about it, it might not seem like it would do much harm. Many people think, “Hey, well I’m making more, why not spend more and treat myself, right?”
This is absolutely detrimental to your financial stability. Almost every college student will graduate with debt, whether it be from a student loan, car loan, or credit card debt. If you are working your ass off to pay off that debt, getting a new, higher paying job is a huge asset to you.
The problem is, many people see all of this new money coming in, and aren’t used to seeing such large paychecks. They almost develop a mindset of “well, if I could make it by with what I was making before, then this extra money I’m making can be used for food, or video games, or makeup, etc.”
This may sound logical, or at the minimum, not harmful. However, think about this: If you want your hair to grow out, do you cut it? No, you let it grow. If you want to grow tomatoes, do you cut off the bulbs before they fully grow? No. The same concept applies here.
The same concept applies to money and debt.
If you truly want to pay off your loan and be out of debt as soon as possible (which you should, by the way), then you shouldn’t spend more money simply because you make more! You should instead invest your money, sit on it, and then use that appreciated income to pay off your debt even faster.
So, what should you do if you get a higher paying job? Don’t let the shock and awe of a massive paycheck trick you into spending more.
What Should You Do Instead?
As I mentioned, this new job is a huge asset to you and your financial situation. So, since you aren’t going to increase spending, what should you do with your money instead?
- Pay off debt. This is huge. There is nothing better than being debt-free. It relieves financial anxiety and puts you in a very favorable financial position.
- Invest your money! Investing your extra income is an absolutely phenomenal way to build wealth. If you invest in an index fund, put your money into peer-to-peer lending, or put it into a high-yield savings account, CD, or money market, you can grow your money and make it work for you! (check out this page for my favorite financial services and even more ways to make money)
- Create an emergency fund. This is a great way to ensure you are covered in the case of unforeseen events. Put a thousand dollars in an emergency fund every few months. Then, if your car breaks down, your computer breaks, or your fridge randomly dies, you’ll be covered and won’t have to withdraw investments (or borrow money – yikes!).
By doing these things, you can avoid being like so many millennials that throw away their money as soon as they earn it. Save, invest, and be financially responsible, and you will have a wealthy, bright future ahead.
Then, you’ll have a reason to celebrate.
Be sure to share this article if you enjoyed! There are plenty more articles for you to read, so be sure to head over to my blog to check them out! If you want to check out my list of the best finance apps, banking services, and more, check out my resources page! Also, follow me on Twitter and subscribe for email updates so you know when I post!