Millennials are less interested in money and finances that any previous generation. Even so, it’s still important for Millennials to take steps to avoid the common financial mistakes committed by younger folks. Placing too much emphasis on financial wealth can be a shallow way to live, but having financial challenges isn’t a lot of fun either.
Avoid the common mistakes of Millennials that can derail your financial future:
1. Waiting to get started saving. Sure, you want a new car or a big screen television instead. However, if you take the time to do the math, it’s obvious that the most important part of saving is getting started now.
• Every seven years that you delay cuts your retirement nest egg in half.
2. Failing to take advantage of full matching in your 401(k). Your employer may give you free money for your 401(k). It’s crazy not to take full advantage of this generous offer. Get in the habit of saving by contributing to your 401(k) as soon as possible.
3. Underestimating the value of a budget. No one enjoys making and sticking to a budget. But what happens when you don’t have a budget? You do whatever your emotions of the moment dictate. A budget keeps you grounded and on track. You’ll spend more than you should, and save less, if you don’t have a sensible budget in place.
4. Ignoring the importance of an emergency fund. A single, unforeseen, financial mishap can derail the best of financial plans. For most Millennials, this will probably result from a major car repair or medical bill. Even with health insurance, the deductible can set you back thousands of dollars.
5. Failing to realize that retirement isn’t that far away. High school may have seemed endless, but you’ll be surprised by how quickly the next few decades go by. Avoid being shortsighted. Start saving and preparing for a bright future.
6. Underestimating the value of establishing and protecting your credit. Poor credit can be very expensive. You’ll pay more in interest on credit cards and any other type of loan. It can even cost you a new job. Higher interest payments leaves less money for your savings.
• Avoiding credit cards altogether might be admirable, but it’s important to build your credit in some fashion. How will you ever purchase a car, home, or condo without any credit?
7. Not calculating student loan payments before taking the loan. Art history is a wonderful field of study. But if you’re going to be stuck paying $850/month on your student loans at graduation time, it might not be the best option. Ensure that your eventual salary can cover your loan payments adequately.
• You might find that you need a less expensive school or a better paying career path.
8. Failing to have adequate insurance. Millennials are the most likely to skip health insurance. This can be a grave mistake. Under the current laws, you’ll pay for not having insurance. You may as well get the coverage you need. Ensure that your possessions are covered adequately, too. If you’re married or have children, life insurance becomes important, too.
• Without insurance, your savings can be wiped out in an instant.
9. Accumulating unnecessary debt. Debt is the albatross around your neck. Most of us need to borrow money to purchase a car or home. However, accumulating debt to purchase unnecessary items is foolhardy. Debt has a way of growing and creating sleepless nights. Do yourself a favor and avoid silly debt. Debt will ultimately steal from your savings.
There are many advantages to being young. There are also many opportunities to make your future challenging. Avoid committing errors in your youth that will haunt you for the rest of your life. Making saving a priority.