Five money mistakes millennials must avoid in their first job

Creation of liabilities – credit card debt

Spending too much on wants leads to another big mistake – loans. Banks not only open a salary account but also try to push a credit card. The credit card initially is used as a means to pay for shopping. However, quickly it becomes a means to borrow money. The EMI offers become the norm and the user lands in the web of credit card debt without realising it. Personal loans join hands with the credit card loans and make the situation worse. It not only makes you pay high interest but also postpones your investments as there is no surplus left with you.

“If you find it difficult to control your credit card usage, switch to debit cards or netbanking. This will ensure that you will not overspend,” says Abhinav Gulechha, a SEBI registered investment advisor.

Buying property

While the loans and spending sprees haunt many young employees, they are also under pressure to buy a house. Buying a house is seen as a sign of arriving in life. “Due to peer pressure sometimes individuals end up buying property in their first job using a bank loan,” points out Abhinav Gulechha. Instead of going for a large home loan, it makes sense to put in place some contingency funds first. You should first define your financial goals. Depending on the priorities one should start saving to achieve the right goals over one’s lifetime, he adds.

Not saving for retirement

Absence of savings makes one miserable. Loans simply add to one’s woes. Either they have zero savings or they have some exotic investment portfolios. “When one takes up the first job, normally there are only three goals – car, marriage, house. But they want to explore exotic investment products or explore day-trading. There is a mismatch between their financial goals and their investments,” says Rohit Shah.  Though, most millennials subscribe to the idea of early retirement, rarely do they recognize it as a financial goal and want to save money for their golden years. "If you are young, use the power of compounding to your advantage. Opt for mutual fund systematic investment plan," advises Rohit Shah. Your investment plans can put you ahead while walking towards financial freedom.

Not upgrading the skill sets

One must ensure that his income grows over a period of time to achieve the dream of financial freedom. However, many millennials become complacent once they land a job. Due to changes in technology, demand environment and consumers’ tastes job markets have become competitive. In industries such as financial services and information technology one must be updated with recent developments, otherwise there is a high chance that the companies won't be keen to continue employing such individuals. "To maintain their employability youngsters have to keep updating their skills – operating, financial, behavioural and strategic skills. It makes sense to invest in oneself by accessing various knowledge sources," says Girish Jakhotia, Chief Consultant of Jakhotia & Associates, a management consulting firm based in Mumbai.

First job typically exposes you to a demanding corporate work environment. At the entry-level, most individuals are required to do operational, process-oriented jobs. You come to know about the skills in demand. You should identify the relevant skills which suit your profile. You can then take up some online courses or part-time courses to acquire such skills in demand. Investing in yourself can protect you from the risk of loss of jobs. Instead it puts your career on fast track.