According to the expert, financial commitments may seem less significant to a young person if the monthly payment is small. However, several smaller commitments together can quickly become a burden, especially if income is not yet stable or changes are expected in the near future – studies, job change, moving, or plans for the first home.
“The loan itself or buying on installments is not a bad decision. It becomes risky when a person only considers whether they can afford this month’s payment but does not think about how such a commitment will affect their budget in six months or a year. A financial decision should help solve a need, not close off opportunities in the future,” says R. Mylė.
Small payment, small price?
In recent years, solutions like “buy now, pay later” have been increasingly offered to young consumers. They are especially attractive when buying phones, headphones, computers, household appliances, or other higher-value items. According to the expert, such offers can create the impression that the purchase costs less than it actually does.
“When instead of a few hundred euros you see a monthly payment of a few dozen euros, the decision seems easier. However, it is important to calculate not only the payment but also the total price, contract duration, interest, fees, and how many such commitments you already have. One installment can be managed, but three or four can significantly change the daily budget,” notes the “Luminor” expert.
Before buying on installments, the expert encourages assessing the real need for the product: how urgent the purchase is, how long it will be used, and what mainly motivated the decision – a real need, advertising, a social media post, or encouragement from friends.
Trips and experiences end faster than payments
Another area where young people underestimate risks is trips, festivals, celebrations, or other experiences. Although they create emotional value, the financial commitment can last much longer than the event itself.
“A trip or event can be a very important experience, but it is necessary to honestly assess whether it is worth paying for it long after it has ended. If payments for one trip later limit the ability to save, pay for studies, or calmly cover essential expenses, that is already a signal that the decision may be too expensive,” says R. Mylė.
According to her, it is usually safer to save in advance for trips or entertainment. This way, a person can better assess their possibilities and not feel additional pressure about future debt during the trip.
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Investment in yourself can be meaningful
Decisions that can help increase income or professional opportunities are viewed differently – for example, courses, training, a driving license, a computer necessary for studies or work. In such cases, financing can be justified if it is clear what value it will create.
“If borrowing is for education or a tool that will help earn more, find a job, or acquire necessary skills, such a decision can be rational. However, even when investing in yourself, it is important to have a plan – how much it will cost, how long it will take to fulfill the commitment, and what will happen if income is lower than expected,” the expert says.
She adds that before making a decision, it is recommended to compare alternatives: maybe part of the amount can be saved, choose cheaper training, used equipment, or postpone the purchase for a few months.
The limit – financial flexibility
According to R. Mylė, one of the most important signs that there may be too many commitments is losing financial flexibility. If after payments and essential expenses there is almost no money left even for small savings, unforeseen cases, or daily life, such a decision poses a risk.
“Financial flexibility is especially important in youth because life circumstances can change quickly. Work, residence, studies, relationships, health – all these can affect income and expenses. Therefore, before taking on a commitment, it is worth checking whether you could fulfill it even if income decreased for one or several months,” she says.
The expert recommends that before borrowing, young people first create a realistic monthly budget and include not only rent, food, or transport but also small daily expenses that often go unnoticed. It is also important to have at least a small financial reserve.
“Debt should not be a way to constantly catch up with your desires. It can be a useful tool if there is a clear goal, a reasonable amount, and a specific repayment plan. But if the commitment is made just because you want to have an item or experience here and now, it is worth stopping and calculating again,” summarizes R. Mylė.
