7 Worst Millennial Money Mistakes You Should Fix Now
Hello there, twenty-something human being who clicked this article. I’m sure you’ll agree that millennials are taking over the world now, making great advances in building their careers while maintaining thriving social lives (usually), all carefully documented on social media. While this is awesome, the problem is, these independent millennials are also among those who don’t maximize their money well. The worst millennial money mistakes come as a result of being given a decent paycheck but with no knowledge of how to use it to the fullest.
Because of this, millennials miss out on a ton of opportunities to grow their nest eggs and save for the future, even while weathering economic ups and downs. Yes, there are a lot of big words to encounter when you finally enter the world of personal finance, but the truth is that if you can set your mind to this early on in life, you will reap the rewards.
Here are some of the millennial money mistakes to avoid. Are you guilty of committing any of these?
Millennials don’t know how to budget.
In college, most millennials lived on day-to-day or week-to-week allowance, with the assurance that you can get more from your parents. However, when you start working, you have more bills to pay and a paycheck that has to last at least two weeks.
It’s a good idea to be aware of what your obligations are, and make sure there is enough money to cover them. Consider things like rent, phone bill, food and transportation. Make sure that whatever you are spending on is within your means, so if you are an entry-level employee, it might not be a good idea to keep eating at 5-star restaurants every day! There are a ton of easy apps to help you create a budget and monitor it.
Millennials don’t save.
It’s exciting to get that first paycheck and spend it on everything you couldn’t spend on when you were in school! However, this is one of the worst millennial money mistakes. Because most millennials don’t budget, they also don’t allot a portion for savings.
Savings are really important because at this age, most twenty-somethings don’t have a lot of financial responsibilities yet. So, you can afford to do this and leave something for a rainy day. A good rule is to allot a portion of your salary to savings and investments first, then use the rest for your expenses. Even a small amount of savings each payday can increase exponentially when you are consistent. There are a number of easy savings plan models that you can follow, depending on what you are comfortable with.
Millennials spend too much.
In addition to not saving, millennials sometimes spend too much that they haven’t realized how much money they have burned through in a week. This is definitely one of the worst millennial money mistakes. From too-frequent lunch outs, to after-work drinks to “because I deserve this” shopping trips. How many times have you said that you’ll have just one beer tonight but it turned into a bucket?
Self-control is one thing millennials have to learn. It’s not about gratifying every want and need—it’s about choosing what is more important to spend on. There’s nothing wrong going out on a Friday night, but perhaps stay at home the next Friday. At the same time, it’s completely fine if you feel you deserve a really good lunch out today, but compensate with packed lunches for the rest of the week. If you are able to set a budget for yourself and really stick to it, you’ll find that your savings left over at every end of the month will increase. Again, try using free apps and diligently record your spending so that you can alert yourself when you go overboard.
Millennials don’t get insurance.
Most millennials believe they don’t need insurance because they are too young. They think that insurance is only for older people who have money that can be allotted for this. The real deal is that anything can happen to anyone at any time—even young people can fall sick or figure into an accident. Insurance helps make sure you have a cushion in case this happens. For a small monthly amount, you can take advantage of comprehensive insurance plans.
Insurance has become so much more affordable, and in fact it is way cheaper when you are younger. Insurance is also not just for health benefits. You can even get insurance plans that have a portion allotted for growing your money that can be used towards a future fund, like a retirement fund, a house fund or a car fund.
Millennials don’t have an emergency fund.
Let’s be clear about one thing: savings are not the same as emergency funds. Emergency funds, as the name suggests, is a short-term fund prepared in case something happens, like if you lose your job, get sick or need to pay for something urgent. As with savings, it’s a good idea to allot a portion of your net salary to your emergency fund and grow it month by month so that you end up with a sizable amount of money. Experts say you should have at least three months’ salary in your emergency fund.
Millennials don’t learn about investing and personal finance.
Let’s be real. Personal finance isn’t exactly a subject they teach you in school, but it’s impossible not to be aware of the topic. There are a lot of resources available online about investing for beginners, and there are even free seminars on financial planning. Don’t know much? Make it a point to expose yourself to as much knowledge as you can.
Understanding the basics early on will give you better clarity on how to manage your money, how to make your money work for you, and eventually build wealth over time.
Millennials don’t invest.
There is a notion that investing is very risky. To some extent, it is—depending on what you choose to invest your money in. There are various investment products available in the market suited for anyone, from the hesitant beginner to the seasoned investor.
Investing means making money work for you. Did you know that you lose money in the bank? Year on year, the value of your money goes down because bank savings account interest rates cannot cope with inflation. Investing your money means putting them into instruments that have higher interest rates than banks. This means you beat inflation, and you have the potential of making more money, too. By educating yourself about investments, you can make informed decisions where to put your money and reap the benefits.
After reading this article, take a good, hard, long look at the state of your wallet. Are you committing these millennial money mistakes? Will you be able to survive the next three months if you don’t have a job? Do you think you will be able to reach your goals like buying a car, a house, or a condo in the next few years? Do you have savings?
If the answer is no, then don’t fret. The way to build your future is to start now. Take charge of your money while you are young, and avoid these millennial money mistakes so that you can continue to enjoy life to its fullest!