1.) Putting too much money in savings.
It’s good to have money saved in case of an emergency, but a savings account isn’t the best way to store money long-term. This may come as a surprise, but money left in a savings account is actually losing value! Due to inflation,-although the dollar value stays the same- your money has less buying power the longer it sits. Instead you should invest some money so you not only match inflation, but gain value over time. (How Inflation Affects Your Savings)
2.) Overusing your credit card
Many college students are enticed into getting a credit card. Credit cards are a great way of building credit, but are also a great way of building debt. Many people don’t learn how to use their credit card efficiently until they already have mountains of debt. Learn how to use a credit card before you get one. ( Should You Have a Credit Card in College?)
In your 20’s is a great time to invest in riskier investments since you will hopefully not need your money for a few more years. However, it is possible to put too much of your money at risk. The most common thing I see millennials over-investing themselves in is cryptocurrency as a get rich quick scheme. I own cryptocurrency myself, but try to keep in a set, smaller amount of your overall investing portfolio.
4.) Not bringing in enough income
When you live at home, it is easy to live off a part-time job. Although you might not need the money now, it’s important to save and invest for the future. Pick up a side gig or barter for a raise to bring in more income. Funnel any extra money into an investment account.
Having your own money to spend is invigorating! The sense of financial freedom can encourage some people to overspend. Decide how much money you want to save and invest each month. Don’t be afraid to wait a few months for something you really want to buy.
If your friends are having financial trouble it can be tempting to loan them money so they don’t miss a fun night out. This money adds up overtime, and you will likely not get it back. Spend money on your friends, but know where to draw the line.
Anything you would add to the list? Let us know!
Sticking to a budget is easier when you know how much you are going to pay each month. That’s why subscription services are so great, you don’t have to budget in the number of times you use the service.
Just like the Gas Method of building credit, my completely un-patented and unoriginal “Netflix Method of building credit” is a way to keep credit card usage consistent. Putting a subscription service on your credit card could be a good way to budget your credit usage, but like all credit tips, it can come with its potential risks.
How to do it?
1.) Set your payment method for Netflix (or any other subscription service) on auto-pay with your credit card
2.) Use Netflix (as we all do)
3.) Remember to pay it off every month!
The 3rd step is the real kicker. If you forget that you paid for Netflix on your credit card, the payments could add up and gain interest! Thankfully, a Netflix subscription is cheaper than a tank of gas a month, so forgetting it isn’t going to blow your credit if you only forget once. But forgetting for a year or more could easily begin to put you hundreds of dollars in debt.
Is this right for me?
If you like having a steady, consistent budget and have a good memory then I think this is a great budgeting technique. But, I do know it’s already easy to forget about auto-renewing payments and having one on a separate card than your regular account does make it hard to remember. Someone on a tighter budget may not find it worth the hassle of remembering.
It can be hard not to reach for your credit card when you see a shiny pair of shoes or drive by that expensive sushi place down the block before your next paycheck, but keeping your purchases consistent is the best way to track your credit. We’ve all put purchases on our credit card that we’ve forgotten about until we check our statement at the end of the month. These small inconsistencies can be prevented if you use the Gas Method.
What is the Gas Method?
The Gas Method means that you use your credit card only for purchasing gas. This method works because, for most people, gas is a purchase you have to make once or twice a month and is small enough to not use up too much credit, but large enough that you’ll remember to pay it off.
Did you make it?
No. I’m just giving it a capitalized name to make it sound more attractive.
What are the benefits?
Because most people use a set amount of gas each month, you are much less likely to be swayed by rewards programs or deals. Unlike with spending money on groceries or shopping, buying extra gas on your credit card is much less attractive. It is also easy to budget, because although gas prices and the amount you use may change, it is often within an easy to predict range.
Why gas? What if I don’t drive?
There are many other things you could use to get the same results. In fact, some people might prefer putting a subscription service on their credit card such as Netflix. That way, you know exactly how much you’ll be charged each month.
What purchases do you usually make on your credit card? How do you stick to your credit card budget?