Let’s face it – personal finance is difficult. It’s not impossible, but boy, does it require some creativity! Like most generations, millennials are no strangers to making financial mistakes, whether it’s splurging on avocado toast or betting the farm on crypto. The struggle is real! Here are 13 money mistakes many millennials make (try saying that five times fast!) and how to avoid them.
1. Ignoring Retirement Savings
Many millennials think that retirement is way too far away to even care about, so they don’t bother saving for it. That’s a big mistake! By contributing early, even in small amounts, you’re allowing compound interest to work its magic. This will turn your pennies into dollars before you know it, so make sure you start it early.
2. Fear of Investing
It’s natural to feel hesitant about investing. After all, stocks and bonds can be confusing! But don’t let this fear stop you from earning some extra cash – instead, start overcoming this fear by educating yourself on the basics of investing. Speak to an investment adviser to help build your confidence and learn more about the financial market.
3. Living Beyond Means
A common millennial mistake is spending more money than they earn, which quickly leads to them dealing with debt and financial stress. The key to avoiding this is to create and follow a budget. Track your expenses and identify where you can reduce your spending to ensure that your outflow isn’t greater than your income.
4. Ignoring Emergency Funds
Many millennials don’t have an emergency fund, which is hurting them more than they realize. Without one, unexpected expenses can easily destabilize their finances. To prevent this, put around three to six months of living expenses in a savings account and leave it there. It’s a financial buffer for the unknown that will keep you afloat.
5. Falling for Fast Fashion
Sure, trendy and affordable clothing seems nice. However, the prices soon add up when you find yourself having to buy new ones because your clothes have worn out! A more sustainable approach is to invest in high-quality, timeless pieces that will last longer, which will save you money and help the environment. It’s a win-win situation!
6. Overusing Credit Cards
It’s very easy to misuse your credit card, and millennials know this all too well. Soon enough, they’ll have skyrocketing debt with high interest charges—ouch! To avoid this, use your credit wisely by spending only what you can pay off in full at the end of each billing cycle. This way, you can use any rewards or benefits from your card without the burden of debt.
7. Student Loans Mismanagement
Many millennials struggle with student debt simply because they don’t understand their repayment options. You’ve got to get familiar with the different plans available, whether it’s income-driven repayment or standard repayment plans, and reassess these options as your financial situation changes. You might even want to refinance your loan if it leads to lower interest rates.
8. Ignoring Health Insurance
For millennials, ignoring health insurance might seem like a cost-saving tactic, but it’s a risky move that can lead to huge financial problems. Health issues are unpredictable, and you might be surprised at how high medical care costs can be. Get good coverage to protect yourself and your loved ones. Don’t be afraid to speak to a broker or shop around to get the best deal.
9. Subscription Overload
It’s hard for millennials to resist the appeal of subscription services, whether it’s streaming platforms or meal kits. However, these can lead to monthly bills that can quickly rise without them realizing it. Check over your subscription services regularly to identify which ones you actually use and cancel anything that’s unnecessary. If you’re struggling to find anything to cancel, remember nothing is stopping you from canceling it now, and resubscribing in a few months if needed!
10. Not Negotiating Salary
Many millennials miss out on potential earnings by accepting an initial offer without discussion. Before entering salary negotiations, research the typical pay for the role and industry to get a realistic expectation. If you do this well, you’ll get more money immediately and also set a higher baseline for future raises and benefits.
11. Not Being Financially Literate
A lot of millennials completely underestimate the importance of financial literacy, but understanding the basics will help you to become more financially stable. You don’t have to just read stuffy old books or do online courses – why not speak to people who are in the know? That way, you can make more informed decisions.
12. Not Using Technology to Your Advantage
Technology can solve almost anything in life, so it’s pretty strange that so many millennials seem to forget to use it to help with finances. There are so many budgeting apps and automated savings programs out there that can help with finances. Every single one of them can make financial planning far easier!
13. Impulse Buying
Impulse buying is an absolute killer for millennials. Sure, a little spending here and there is okay, but soon enough, it adds up! To avoid this, try waiting 48 hours or even 30 days before buying something. Waiting this long might make you realize that you don’t actually need it. But if you still want it, don’t feel any shame in buying it!
Many Challenges
Although millennials face quite a few financial challenges, there are tons of resources at their disposal to help them avoid these issues. And you can do it too! Try to address some of these common mistakes to put yourself on the road to financial freedom. After all, it’s your future – don’t you want it to be good?
Tamila McDonald is a U.S. Army veteran with 20 years of service, including five years as a military financial advisor. After retiring from the Army, she spent eight years as an AFCPE-certified personal financial advisor for wounded warriors and their families. Now she writes about personal finance and benefits programs for numerous financial websites.
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