Many millennial expats who don’t have the opportunity to live with family to cut costs need to stop making these three personal finance mistakes, an expert told Arabian Business.
Millennials have consistently voiced concerns about the significantly higher costs of homeownership compared to the Baby Boomers generation when they were starting out their careers. Millennials have had to grapple with a complex interplay between economic conditions and individual financial choices.
Factors like soaring house prices and economic fluctuations undoubtedly affect millennials’ ability to enter the housing market. But personal spending habits also loom large in this equation. Even those with substantial incomes can find homeownership elusive due to excessive spending and neglecting savings.
From indulgent spending habits like costly brunches and the relentless pursuit of an idealised, Instagram-worthy lifestyle, to skyrocketing rents and house prices, and for some, the weight of student debt present a formidable obstacle to securing their financial futures.
This is further exacerbated for many expats in the UAE as the option of living with family to save costs, as seen in other countries, isn’t available, said Dubai-based personal finance expert Carol Glynn.
“They have to pay rents that are increasing year on year, while also trying to save for a deposit on salaries that are not keeping up with inflation. It’s a difficult time,” the personal finance coach and mentor told Arabian Business.
Although economic factors have played a significant role, millennials could do more to improve their financial situations. According to Glynn, here are the three most common money mistakes that millennials are making that are hindering their financial futures.
Delaying savings, retirement planning
Constantly putting off saving for retirement and “not considering the bigger picture” is one of the most common habits Glynn said she has seen among millennials.
“Many millennials prioritise immediate financial needs and wants over longer-term financial security. This can be attributed to a combination of factors including stagnant wages and the belief that they have time on their side. This leads to lack of focus on short-term spending such as shopping, entertainment and travel,” she explained.
The general critical lack of financial literacy and confidence might be in part to blame as well.
“Millennials are bombarded with financial advice on social media. The volume and often contradictory nature of the advice can be daunting and overwhelming. This is not to mention, dangerous as it is unfortunately not all good advice,” Glynn added.
“The confusion and overwhelm they feel can cause procrastination to make savings decisions, especially if they believe they have time on their side. Yet, delaying retirement savings can result in missed opportunities for compound interest to work in their favour, making it harder to achieve financial independence in the future.”
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Excessive debt accumulation
“While many of my millennial clients come to me in a healthy financial position, seeking independent help with how to manage their savings, a high percentage also come to me due to debt that has grown beyond their control. They come to me as they are scared, confused and don’t know what to do to get out of debt,” Glynn said.
Accumulating excessive debt has hindered many millennials’ ability to save up for major life goals such as buying a house or starting a family. Accruing high-interest debt, such as credit cards, can lead to a cycle of living from paycheck to paycheck, adding to financial stress and essentially, holding you back from saving for or investing in your future.
“Millennials are dealing with the impact of recent years of higher inflation. This will impact their purchasing power and without good financial habits and an understanding of debt, especially credit cards, I foresee an increased risk of accumulating debt for this generation,” she added.
“There is a major gap in financial literacy across all generations, and this combined with easy access to consumer debt in this region, it’s no wonder many millennials find themselves in difficult financial situations.”
Neglecting financial education, budgeting
Though there may be a significant lack of financial literacy among all generations, Glynn said that through her work with millennials she has been able to identify that they lack budgeting skills and dislike implementing a budget as they feel it will restrict their freedom to spend as they pleasure.
“They often want an app to do everything for them and to make it very easy. Unfortunately, good budgeting can require time and energy, at least in the beginning but it is an important life skill for all ages.” said Glynn.
The absence of good budgeting and financial literacy can often result in poor money management, leading to a host of problems including debt and a lack of motivation to plan for the future.
“Without a clear understanding of budgeting, saving, and investing, they may struggle to make informed financial decisions, which can affect their ability to build wealth over time. They are also at risk of exposing themselves to bad financial advice which can lead them to making detrimental investment decisions.”
For those looking to adopt healthier personal finance habits, Glynn suggested they begin to budget, set up an automated savings account, reduce unnecessary expenses, negotiate bills with service providers (internet, phone, insurance) to ensure you are spending wisely, and do not use credit cards unless you have the discipline to pay them off in full every month.
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