The Millennial generation gets a bad rap, and with 92 million young adults making up the largest generation in US history it’s easy to see why the older generations worry. As millennials enter their prime spending years involving buying houses, cars, and saving for retirement, their spending habits will shape the state of our economy. And while they may be young and there may be a lot of them, the majority of them are educated and do have long-term goals for success.
If you’re part of the millennial generation, make sure that your financial habits won’t cost you in the future by avoiding these five common mistakes made by millennials:
1. Winging the budget
Millennials are all about technology, making checkbooks and paper billing largely a thing of the past. Bills can all be paid online automatically, and you can even Venmo your rent to your landlord. This makes overspending and losing track of your money too easy, as cash is rarely in the picture. But relying on cards and apps without being able to visibly see and touch the money being spent makes it easy to think you have the money to spend when you don’t, and to lose track and get into trouble. Take the time to take out cash and check your balance each morning, so you at least have an idea throughout the day of where you stand, and can keep better track of how much of your income you spend on various daily expenditures.
2. Foregoing health insurance
The healthcare scene is a bit confusing right now, and many millennials have found that the process of applying for their own health insurance is too tedious or confusing. Fortunately, young adults can stay on their parents’ insurance policies until age 26, but after that, they’re on their own. While many are young and healthy and take the risk of being uninsured, they still face a penalty, and also the risk that they do get sick or injured and have to pay out of pocket. Unexpected medical bills can be devastating.
3. Racking up excessive debt
The student loan burden accumulated by millennials is no secret, but how much of it is necessary? Many millennials forego working during college to focus on their studies but end up racking up debt they’ll be paying off for decades. With some time management skills and self-discipline, it is possible to graduate with little or no student debt, even if you don’t have any help from parents. Part-time work, freelance jobs, work-study programs, and scholarships can help offset the burden and save you thousands in student loans and, worse, interest payments.
4. Failing to invest
Investing in your 20’s can put you way ahead of the game come retirement age. Especially with your best friend called compounding interest, the difference between starting in your 20’s and 30’s can end up being a significant 6-figure difference. While your budget may be tight, at least start learning about and looking into investment options, however, conservative or risky they may be, to get your wheels turning and mind on the future.
5. Spending Impulsively
You graduate college, and expect a fancy new job, that comes with a fancy new car and fancy house. You are ready to say goodbye to college living. But being too hasty to live like your parents or other adults you see can derail you from ever living like them, because they, too, had to work their way up to where they are. Be patient and put in your time. Save your money and spend it wisely, and you will live that life without the stress of debt or poor credit attached to it.
For more info on budgeting effectively and making sure your credit score is in tip-top shape, check out our credit repair tips and tricks.