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Hey friends! If you’re a millennial, you’ve probably made some money mistakes. And that’s ok! You’re still relatively young and learning. But the sooner you can correct you financial missteps, the faster you can get on track to live the lives you want.
We’ve all made tons of money flubs. From racking up credit card debt to not saving enough in my twenties. But in this post, we want to share the biggest money mistakes millennials make so you can avoid them. We’ll also share you pro tips and actionable steps to fix your finances.
Key Takeaways
- Budget, budget, budget! Failing to stick to a budget causes many money issues.
- Credit card and student loan debt hold many millennials back financially.
- Not saving and investing enough early on hurts long-term growth.
- Poor planning like lacking insurance can wreck your finances.
- It’s never too late to correct your money mistakes!
Biggest Budgeting Blunders
Not going to lie, budgeting can be boring. Tracking expenses, crunching numbers, following a plan—it’s not sexy. But budgeting is crucial for getting control of your finances.
Not Budgeting at All
The #1 budgeting blunder is not having a budget at all! If you don’t budget, you have no idea where your money is going each month. You could be leaking money without realizing it.
Solution: Commit to creating a budget, even a basic one. List your monthly take-home income, then fixed expenses like rent and debt payments. Factor in variable costs like groceries and gas. Any leftover is savings or fun money. Voila, you have a budget!
Budgeting But Not Following It
Creating a budget doesn’t do much good if you don’t actually use it. Failing to follow your budget leads to overspending.
Solution: When making a budget, be realistic. Don’t deprive yourself so much that you resent it. Build in flexibility for dining out or shopping. And use budgeting tools to make it easier to follow. Mint and YNAB help track spending against your budget.
Failing to Account for Unexpected Expenses
Even the best budgets fall apart when the unexpected happens – a car repair, medical bill, or emergency trip. If you have no buffer for surprise expenses, they can wreck your finances.
Solution: Make sure your budget includes savings each month for an emergency fund. Aim to have 3-6 months’ worth of living expenses banked. This protects you when unplanned costs pop up. A separate “rainy day” fund covers home repairs and car issues.
Outsmarting Debt
Debt is a necessary evil sometimes. But excessive debt is a huge millennial money mistake. It weighs you down for years, preventing you from building wealth.
Racking Up Credit Card Debt
Credit card debt is financial quicksand. High interest rates make the balance swell fast. Carrying a monthly balance also hurts your credit score.
Solution: Use credit cards responsibly as spending tools, not loans. Pay balances in full each month. If you already have credit card debt, attack it aggressively with a debt payoff plan. Transferring to a 0% card can provide temporary relief too.
Mismanaging Student Loans
Student loans plague many millennials. The average debt is around $30,000. Handling them poorly can bury you.
Solution: Make student loan repayment a top priority. Explore income-driven plans to lower payments. Check for eligibility for loan forgiveness programs. Pay extra each month to pay them down faster.
Financing Weddings and Cars
Weddings and cars tempt people to take on way too much debt. A $30,000 wedding or $40,000 luxury car with financing can tank your financial progress.
Solution: Have the wedding and car you need, not everything you want. Set budgets and stick to them. Save up instead of financing big purchases. And compare lease vs. buy options carefully when car shopping.
Squandering Your Salary
It’s easy to fritter away your hard-earned paycheck when you’re not careful. Avoid these common pitfalls when spending your salary:
Living Above Your Means
Lifestyle inflation – spending more as you earn more – is a huge money mistake. You feel like you need a fancier apartment, nicer clothes, pricier hobbies. But giving into those urges prevents you from getting ahead financially.
Solution: Just because you CAN afford something doesn’t mean you should buy it. Cultivate contentment with what you have. Increase your savings rate instead of your lifestyle when your salary rises.
Not Saving or Investing
Failing to save and invest is a cardinal money sin. You miss out on years of growth and compound interest. Just $10K invested in your twenties could grow to $200K or more by retirement age.
Solution: Pay yourself first. Even if it’s just $50 or $100 a month, start investing now. Use an app like Acorns that does it automatically. Increase the amount as your salary does. Time and compounding do the rest of the work.
Overspending on Little Expenses
Death by a thousand cuts – the daily $5 lattes and $10 Ubers that bleed you dry slowly. It’s easy to overlook small expenses, but they add up fast.
Solution: Audit your recurring little costs over a month – your morning brew, Uber rides, takeout lunches. Trim where you can. Making your own coffee or brown-bagging lunch two days a week saves hundreds per year.
Retirement Regrets
Retirement feels light-years away when you’re in your twenties. But neglecting retirement savings now hurts you later.
Not Contributing to Retirement Accounts
Too many millennials aren’t saving anything for retirement. No 401(k) contributions, no Roth IRA – nothing. This mistake can set you back decades financially.
Solution: Save a minimum of 15% of your income for retirement. Contribute enough to get any 401(k) match from your employer. Fund a Roth IRA too. Automate it so the money comes out effortlessly.
Cashing Out Retirement Savings
It’s tempting to tap your retirement savings for other goals like a home down payment or to pay off debt. But this sets your future self way back.
Solution: Avoid 401(k) loans or early withdrawals. Shift your budget to find money elsewhere. And remember – your retirement savings is for retirement. Keep it intact for your later years.
Underestimating Retirement Costs
Most millennials vastly underestimate how much they’ll need to retire comfortably. When you only save a fraction of the amount needed, you end up short.
Solution: Run retirement calculators to estimate your full retirement costs, factoring in healthcare and inflation. Use that big number as a guide for how much you need to be saving. A financial advisor can help assess if you’re on track.
Poor Planning Pitfalls
Failing to plan ahead with things like insurance and estate planning is a common and costly oversight. Don’t let it wreck your finances.
Lacking Insurance Like Disability or Life
Insurance feels like a waste of money – until you actually need it. Skimping on key policies like disability, life, or health insurance is risky. An accident or illness can devastate your finances overnight.
Solution: See insurance as financial protection, not an optional extra. Make sure you have adequate disability, life, health, and auto insurance. It’s better to pay a small monthly premium than face financial ruin.
Not Having a Will or Estate Plan
No one likes thinking about death or incapacity, but not having a will or estate plan is irresponsible. Without them, your assets and loved ones aren’t protected.
Solution: Draft a will so your assets go where you want. Designate beneficiaries for accounts like retirement plans. Set up powers of attorney for medical and financial decisions if you’re ever incapacitated.
Making Financial Decisions Solo
As a couple, it’s critical to get on the same financial page. Keeping money secrets or making big money moves without consultation damages trust and stability.
Solution: Have ongoing open communication about money and financial goals as a couple. Review budgets together. Discuss big purchases and investments. Make financial decisions jointly after mutual understanding.
In Closing
We all have room for money improvements – even millions make mistakes! The key is awareness. Identify where you’re going wrong, then take steps to correct course. Small consistent changes make a big long-term difference.
What money mistakes do you see in yourself? Which solutions resonated with you? Share in the comments! I love connecting with fellow millennials on our money journeys.
To recap, here are three key steps to start fixing your finances:
- Analyze spending and make a budget
- Attack debt and build savings
- Plan ahead with retirement, insurance, and estate planning
You’ve got this! Wishing you abundant blessings and financial wisdom ahead. Now go take action on your money!
Frequently Asked Questions
How much should I have saved by age 30?
By 30, aim to have at least 1x your annual salary saved as a minimum. 3-6 months’ worth of living expenses in an emergency fund, and be contributing regularly to retirement accounts.
What percentage of income should go towards retirement?
You should be saving a minimum of 15% of your income for retirement every year. Some experts recommend 20-30% to retire comfortably.
How can I fix my credit score?
Pay all bills on time, keep credit card balances low, and dispute any errors on your credit report. Also consider a credit builder loan to add positive payment history. It takes time, but consistency pays off.
What types of insurance do millennials need?
Key insurance policies for millennials are health, disability, life, auto, and renters/homeowners if you own property. Make sure coverage amounts are sufficient for your needs and stage of life.
How much house can I afford on my salary?
A good rule of thumb is that your total mortgage payment (including taxes and insurance) should be no more than 28% of your gross monthly income. Use a mortgage calculator to estimate payments based on income, down payment etc.
How can I manage student loans?
Explore income-driven repayment plans, student loan forgiveness programs, pay extra each month to pay down principal faster, and consolidate or refinance loans to better rates if possible. Stay organized and have a payoff strategy.
Should I lease or buy a car?
If you drive a lot and plan to keep the car long-term, buying often makes more sense. Leasing has lower payments but ownership limits. Compare all costs carefully. Buying used or outright with cash are other good options.
Disclaimer: The information provided in this blog post is for general informational and inspirational purposes only. We’re sharing this information to offer ideas, tips and motivation for starting a business, but this should not be considered professional advice. Starting a business is complex with many moving parts, and what works for one aspiring entrepreneur may not work for another. Before taking any action, please consult with legal, financial, tax and other relevant professionals to determine the best steps to take for your own specific circumstances. The financial estimates, costs, revenues, timelines etc. mentioned in this post are approximate numbers gathered at the time of researching & publishing this post and are subject to change. We do not guarantee any specific financial or other results/outcomes. Please read entire disclaimer here.
