Bad Spending Habits You May Be Making
How many times have you seen kids straight out of high school or fresh out of college driving a brand new higher end car? Why is it that Facebook and Instagram show us pictures of our peers “living the dream” with high end toys and exotic vacations? Millennials tend not to have a good concept of money and budgeting. And why should we? The debt we incur in student loans, credit cards, and auto loans seem like more of a problem for our future selves than our current selves. So why trouble yourself with it today when you can push it off for tomorrow?
I tend to think that our high schools do a pretty poor job of explaining financial responsibility. [Dan’s edit: High schools do a terrible job teaching financial literacy. My high school didn’t even offer classes on finance, budgeting, etc.!] Many people begin to learn financial responsibility in college when they have to start figuring out how to pay their rent, their bills, their tuition, and pay for their groceries. These kids tend to not be able to afford nice cars and nice living spaces because their money is going straight towards tuition, but when you look closely, you can see that even the “poor college student” walks around in UGG boots, Sperry shoes, designer jeans, BEATS headphones, Ralph Lauren Polos, Oakley Sunglasses, Brooks Brothers suits, or any other higher end brand of clothing carrying their iPod, smart phone, tablet, and laptop in their backpack. 
They have prioritized these things over contributing more money towards their ever increasing (wonder why…) tuition. Now, to be fair, if they’re lucky enough to be born into a rich family, they can probably afford the college tuition and the nice-to-haves. Good for them. Most of us don’t have that luxury and will have to make it for ourselves.
These little splurges don’t end after college. If anything, they start getting worse as young adults receive their first ‘big-kid’ pay checks. I get it. College is over, you find a job, and you start looking at your annual salary. You start thinking about all the things you’ve wanted to buy that you can finally purchase: a new car, a big TV, a swanky condo, and a nice new boat are all right at your fingertips! Your personal budget exclusively consists of monthly income > monthly expenses. I have seen a friend who was bored on a Saturday go out and buy a jet ski. The week prior he bought a new truck on a whim! People my age also tend to reward themselves with purchases or indulgences. I regularly see people on social media talking about their ‘retail therapy’ after a busy week. This is a pretty self-destructive habit. If you really want to get rid of money, throw it away in an IRA or a 401k plan [Dan here again… as nerdy as this sounds, I did just this with my Roth IRA. Nowadays, I budget to have it maxed out.]
These spending habits aren’t just limited to toys. It’s no secret that millennials are traveling and searching out destination experiences more than any other age group. What is the cost of this to your financial success?
How many people do you know feel that it is their right and responsibility to take a 1-2 week long vacation trip at some point during the year? They plan their whole lives around it!
I’m not arguing that you should never go on trips or see the world, but I am suggesting that if travelling is your passion, make sure that you’re doing it smartly for your budget and remember that how much money you have available to you isn’t necessarily how much you can “afford”. 2% of your annual salary on a one week vacation adds up over a few years.
The problems continue to stack from plenty of other financial vices. It’s going to happy hour all too often; it’s buying the expensive whisky (or whiskey, depending on your preference); it’s buying the sweet sound system for the car; it’s the concert you went to… and then got drinks before and after as well. I bet the photos look great on Instagram; but I also know these things wreaked havoc on your long-term financial future. And what do all of these things have in common? They are either a depreciating asset (like a car, which has lost value by the time you sell it) or are not an asset at all (as in, you can’t sell the concert once you have already attended it). These are unlike an (at least potentially) appreciating asset such as investments, education, or real estate.
Look, Dan and I are not saying don’t enjoy life. What we are saying is: you’re probably not saving enough, if anything. Rules of finance don’t change much over time. This is probably the longest held rule of them all: Don’t spend what you don’t have. Don’t buy things you don’t need. If you buy something on credit, make sure you can pay it off that billing cycle. I promise that your future self will thank your current self for saving money up instead of buying the latest gadget or jewelry.
