Millennials are not alone, everyone makes money mistakes, but millennials are the latest generation to enter the real world and are just starting to figure things out. Here are some of the biggest money mistakes millennials are making.
Disclaimer: I am by no means a financial expert, but I do make a great effort to educate myself on all things money so I can make smart financial decisions.
Going into credit card debt
I shouldn’t have to be the one to tell you this, but credit card debt can hurt you in so many ways. For example, it can hurt your credit score, it can cause you pay a ton in interest, and it can cause problems when it comes to things like purchasing a home. If you can’t afford something don’t buy it. Or, at least make sure you have an established plan in place to cover the costs.
Food delivery services
Nine times out of ten you are paying for to have your food delivered to your door strictly because you are lazy (you’re not the only one so don’t feel bad!). Either go and pick up the food yourself, or better yet, save even more money and make something from home. The extra fees you are spending on delivery may not seem like a lot at the time, but they can add up fast.
Not saving for retirement
I know as a college graduate or as a young twentysomething, retirement can seem like forever away, and you probably think you have a million other things you could be spending your money on. Wrong! The earlier you start saving for retirement the better. It is recommend to be saving at least 15% of your income for retirement. If this truly is not a possibility under your current circumstances, start smaller and work your way up to this goal as you continue to earn more money and grow in your career.
Not having an emergency fund set up
Again, you may be in your twenties thinking what could possibly go wrong? Well, everything. It may be hard to grow an emergency fund if you are just starting out and feel like you are barley getting by. But, make an effort to contribute what you can. It will pay off down the road in case an unfortunate event happens like your car breaking down or an unexpected trip to the emergency room
If you don’t have something set up already, I recommend Dave Ramsey’s method. He suggests starting your emergency fund with $1,000 if you are in any kind of debt and then working your emergency fund up to three-six months’ worth of expenses once your debt has been paid off.
Not living within your means
It can be hard when those in your friend group have higher paying jobs and can afford to live a different lifestyle. Maybe they are always asking you to go to nicer restaurants or on weekend trips that just don’t fit your budget. Be honest with yourself and know what you can and cannot afford. Spending money on things or experiences you simply can’t afford is not worth going into debt for.
Always buying the latest and greatest
If you play this game, you’re going to lose. Yeah getting that new iPhone might be nice for a while…until 6 months later when a newer and better version comes out.
Paying bills late
Not paying your bills on time can lead to things like late fees, poor credit score, and higher interest rates down the road. It’s important to note that the date your bills are due is just that, the date they are due and not the date you should be mailing them in (if you choose to pay them that way). Set up autopay or pay them early if you really want to stay on top of things.
Not knowing how much you are actually spending
$50 on groceries, $25 on gas, $10 on Netflix, $5 on coffee etc. Each and every dollar you spend quickly adds up to a whole lot of money. And, if you aren’t documenting and keeping track of where your money is going, you could be wasting a good chunk of change that you worked too hard to earn.
It can be as simple as setting up an excel sheet or a Google doc and tracking every purchase you make. This will give you a good visual as to where your money is going and what you can cut back on so you can start saving more.
Ignoring your credit score
So you have a credit score, that’s great. Now, do you know that number is? If you don’t know your credit score, how will you know if you need to work on improving it so you can do something like buy a home some day? It’s a good idea to check up on the number every so often to make sure you are on the right path. A higher credit score means you will likely pay less in interests when taking out a loan, and you are more likely to get approved for a loan by lenders.
Not having a budget
Not having a budget can make it challenging to keep your spending at a minimum. Everyone’s budget is different depending on what they make, where they live, how many people are in their family, etc. But having a plan in place when it comes to how much you can spend on groceries or on a night out with your friends will help from overspending. Here is a really great resource that helps explain how you can start budgeting your money better. There is also a free budgeting template available to download that is super user friendly and does all the calculating for you.
Realizing you fall guilty to one or more of these money mistakes that millennials are making? Take a look at these tips for saving money to help you get on the right track.
