Born between 1980 and 2000, Millennials are perhaps the most informed of any generation thanks to having grown up surrounded by modern technology—they’re also poised to make up 75% of the workforce by 2025. That said, millennials actually have quite a bit working against them in terms of finding and maintaining stability, from disappearing pensions to growing home-buying difficulties. When it comes to managing money, millennials are quite a bit different from past generations.
Here are just a few of the biggest financial mistakes made by millennials today, all of which can lead to money management headaches.
There’s no quicker way to live beyond one’s means than to avoid putting together a budget. For many millennials, however, creating a budget is easier said than done. Other priorities, such as finding a job and paying on student loans tend to cloud the need for creating a budget, which is essential for avoiding problems down the road. Fortunately, there are a number of budgeting tools available online that make putting together a proper budget easier than ever.
Avoiding Student Loan Payments
No one enjoys paying their student loans each month, but the fact is that they’re not going to just disappear. Avoiding loan payments can quickly lead to arrears, penalties and fees, all of which can make getting out of debt even more difficult. If you’re having a hard time paying your student loans each month, call your lender and discuss getting set up on a different payment plan. Whatever you do, don’t just stop paying on them in hopes that they’ll go away—they won’t.
Not Planning for Retirement
As important as it is to live in the present, everyone needs to plan ahead in order to achieve financial comfort later in life. This is where setting up a retirement plan comes in. With nearly 50% of millennials having not yet set up a retirement plan, however, many are also losing out on free money, such as matches from an employer in a 401(k). The longer you wait to start saving for retirement, the more aggressive your saving strategies must be. Starting earlier can help to mitigate stress related to saving for retirement.
Renting an apartment is certainly easier than purchasing a home at face value, but in the end, it’s one of the worst financial mistakes a person can make if they continue renting for decades or longer. While home ownership is an investment (and one of the best available), all of the money that goes to renting an apartment ends up in someone else’s pockets—the renter has nothing to show for it after eventually moving. While renting can be a good means to an end, it shouldn’t be the end-all. Unfortunately, millennials simply aren’t buying homes the way past generations have.
While millennials have a great deal of potential for financial success at their fingertips, they’re often dragged down by issues such as those highlighted above. Fortunately, financial roadblocks can be overcome by adopting a better, more mature mindset about money.