20 Financial Mistakes Millennials Keep Making by Nat Berman, SheBudgets
If you are a Millennial, you should start learning about your finances as soon as possible. Why? Because good management of your finances will ensure that you can meet all of your needs throughout your lifetime, whereas bad management of your finances can see them waning in the most inopportune of moments. However, it should also be noted that an earlier start means better results because the power of compound interest makes it possible for you to earn interest on your interest.
With that said, the good management of your finances is much easier said than done. Fortunately, you should be able to overcome the challenges in your path so long as you are willing to put in the time and effort needed the research the subject and come up with a suitable set of strategies. By learning from the mistakes of other Millennials, you can keep yourself from doing the same, thus maximizing your chances of getting the financial results that you desire.
Here are 20 of the most common financial mistakes made by Millennials:
Failing to set a budget is one of the most fundamental mistakes that a Millennial can make. First, this is because a budget tells a person what they are making as well as what they are spending, thus providing them with the information that they need to bring their immediate finances under control. Second, this is because setting a budget and then sticking to the budget builds self-control, which is one of the most important factors for financial success. (1)
Excessive optimism is one of the most dangerous things in the field of finance. For example, if you come upon something that seems too good to be true, you should scrutinize it for signs that you are being misled in some manner. Furthermore, if you are making plans for your future, you should never make them on the assumptions that you will get all of the things that you want. In finance as in other things, hope for the best but plan for the worst. (1)
Most Millennials understand the need to save up for their eventual retirement, but most Millennials also fail to understand their need to have a savings account as well. In short, this is because most people have to make unexpected purchases from time to time, which should be paid for by using the funds that have been set aside in a savings account for that precise purpose. By having a savings account, you can avoid the need to pay for unexpected purchases by using other more expensive methods such as your credit card. (1)
Although retirement is still far off for most Millennials, it is something that should be included in their financial planning as soon as possible, meaning that holding off on retirement planning for the time being is a serious mistake. As mentioned previously, the sooner that Millennials start saving for their retirement, the better-off they will be when the time actually comes. This is because what they earn from their investments can be put in more investments, thus building up their investment portfolios bit by bit and piece by piece. In turn, the more wealth that Millennials have, the more secure their future will be. (1)
Millennials who can’t be bothered to monitor their credit score reports will regret it because their credit scores can influence all sorts of important things, ranging from their ability to secure the financing needed to buy a home to their access to all of the ways that can be used to maximize their earnings from their investments. By monitoring their credit scores, Millennials can see what needs to be changed in order to raise them, which in turn, means more financing at lower interest rates. (1)
With that said, too much borrowing is one of the most common financial mistakes made by Millennials as well. While borrowing to make purchases results in immediate gratification, it also results in a higher cost for the product or service than waiting until sufficient cash has been saved up. Something that is particularly true when you borrow by using particularly expensive options such as credit cards and title loans. (2)
A lot of Millennials fail to predict important events in their personal lives such as their weddings and their first homes, meaning that they are often caught by surprise when these expenditures actually come up. While no one expects you to be able to anticipate all of the things that will happen in your life, you should be able to anticipate the biggest and most obvious so that you can start saving up as soon as possible instead of having to scramble to cover the costs at the last moment. (2)
Speaking of which, a lot of Millennials head into graduate school in order to raise their earnings, but make a serious mistake by failing to minimize the costs as much as possible. For example, some of them fail to take advantage of the research and teaching opportunities that are available to them, which can be exhausting and time-consuming but also leaves them with less student debt to be paid off at the end of it all. Similarly, some of them fail to consider whether their choice of school can actually help them get the career results that they desire, which should be one of their most important concerns. (2)
Since Millennials are still relatively young, they often retain the sense of invincibility that is the prerogative of youth. As a result, many of them are under-insured, which is a serious problem because that means they will be unprotected when something bad happens. Most Millennials should be fine even if they have less coverage than their older counterparts, but they should still have some coverage because the unthinkable can always come to pass. By having health insurance as well as other important policies, they can maximize their chances of being fine no matter what life throws at them. (2)
Disabilities are much more common in the United States than most people would expect, meaning that Millennials are making a serious mistake if they fail to get long-term disability insurance,which will protect them if they become disabled at some point in their working years. Otherwise, if they become disabled because of something that happened at their workplace, the best case scenario is that they will burn through a significant percentage of their savings for the future, thus pushing the realization of their financial planning further and further into the future. (2)
When their employees offer to match their contributions to their retirement funds, Millennials should make sure to take advantage of such offers as much as possible within good reason. After all, their failure to take advantage of a retirement contribution match means that they are effectively giving up part of the compensation offered to them. Furthermore, if they use such offers to maximize their contributions to their retirement funds, they will have a much smoother time in the future. (2)
Millennials who can’t be bothered to learn more about the financial terms that are applied to the various vehicles in which