“I’m Young.” “Nothing but time.” “Family: I’ll think about that later.” “Retirement: Decades away.” “Insurance: I am strong as an ox.”
We all think similar thoughts when we are young. However, if you are a millennial and these thoughts guide your financial actions, it’s important to know the common financial pitfalls — let’s call them millennial money mistakes — that you’ll make when you’re young, only to regret them when you become your future self.
Millennial Money Mistakes with Far-reaching Consequences
Depending on the level of financial education you have received, some of these millennial money mistakes will prove obvious (yet still important), some not so much.
Avoiding Credit Cards Altogether
What? Isn’t cash king? Isn’t credit card debt a nasty spiral? Doesn’t the average American household face $16,061 credit card debt? Well yes, these are all true.
However, lack of a credit card can cause numerous problems.
If you go to a bank or a credit union to apply for a loan, they will look at your credit (FICO) score.
Even though this may sound counterintuitive to some, a lack of credit history is a millennial money mistake because institutions will be less inclined to loan you money without a solid credit history behind you.
Hosting a Wedding with Borrowed Money
How many times have you heard a person say that his/her wedding day is ‘their’ day? Holy emotion! Money and emotions are like oil and water. They just don’t mix well.
Certainly the parents of some may pay for an entire wedding. But the average cost of American weddings is creeping above $28,000.
As the trend of waiting longer to get married continues, more couples are deciding to pay for their own wedding. But expectations are just as high as if their parents were paying. So they borrow money.
Sometimes this borrowed money could be the price of a luxury car, or a huge down payment on a house. It is difficult to start a lifelong relationship with large debt hanging over the marriage.
A smaller wedding may disappoint some, but they‘re not paying for it.
Choosing Money Instead of Future Opportunity
What do young people, or people looking for their first career job, most likely focus on as far as benefits? Salary.
Another millennial money mistake is to look at salary over opportunity for growth.
You need to look at both. Growth is often much more valuable than money because it allows you to move upward and eventually score that position with the big paycheck.
This is the most important mistake to avoid.
An income earner without a budget is likely going to fall far short of any financial goals. Knowing what you bring in, and what goes out (and for what), is of the utmost importance if you want to avoid money mistakes and take hold of your financial future and retirement.
Simple budgeting? Just follow these steps: Document monthly income, document monthly expenses, document likely future expenses, and lower or erase every expense you can.
Millennial Money Mistakes Honorable Mention
These were just a few mistakes. Here are some others:
- Don’t buy too much house.
- Don’t buy too much car.
- Protect your income with disability insurance.
- Don’t wait to save for retirement.
- Attack student loan repayment.
All These Things Are So Adult
Yes, you think you have time. But, you really don’t. Time moves quickly, especially when finances are involved. If you can’t do all of the above, do as many as you can. They get easier the more financially involved you become. Your future self will thank you. That is a guarantee.