The relationship many millennials have with money has been shaped by the Great Recession as well as crushing student debt. This has left millions of young adults struggling to understand basic money management skills. There are several mistakes millennials often make with their money. 1. Not Creating a Budget The first mistake younger individuals often […]
The relationship many millennials have with money has been shaped by the Great Recession and marked by crushing student debt. Both have left millions of young adults struggling to implement basic money management skills. There are several mistakes millennials frequently make with their money.
1. Not Creating a Budget
The first mistake younger individuals often make is not making a budget. You may think of a budget in a negative way – as a way to limit how much you can spend. The better way to think of it is as a way to simply track your spending. Budgets don’t have to be complicated either. A budget can be as simple as listing income on one side of a paper and all bills and expenditures on the other side. Once you see exactly where your money is going it will be much easier to cut back on unnecessary spending.
2. Ignoring Retirement
People in their twenties are notorious for thinking retirement and old age is so far off that it’s something that can be put off for several years. There are several ways to start a modest retirement plan in your twenties and early thirties. If your employer is offering a matching retirement program you’re basically throwing away free money if you’re not investing. In fact, it’s not that difficult to be a millionaire
before age 65 if you start in your twenties.
3. Renting for Too Long
While renting may be smart right out of college or when you’re first building a career, there reaches a point when it’s financially savvier to invest in a home. While some states may offer renter’s deduction on taxes, you’ll generally be able to receive greater tax benefits when owning a home. This is especially true right after you purchase a new home. Despite fluctuating markets, a home is still one of the best investments a person can make.
4. Not Having an Emergency Fund
Many Americans are one illness or accident away from bankruptcy. Even something less dramatic like a car accident or a major appliance breaking down can cause financial chaos. According to CNN Money
, not having an emergency fund is one of the biggest mistakes that millennials are making. Ideally, you should have enough set aside to cover living expenses for at least three months. Consider getting a bank account like Chime
, that helps you automatically save and build up an emergency fund.
5. Not Understanding Taxes
How you file and what kind of deductions you take can make a huge difference in how much money you get back or owe. Of course, the tax code hasn’t gotten easier to understand in recent years, making it even more difficult for young adults who have little or no experience dealing with taxes. It’s definitely worth your while to invest in professional assistance during tax time. Missing credits and refunds, as well as not disclosing all income such as a side-gig, can all mean trouble at tax time.
6. Not Having Enough Insurance
Most young adults are in good health and aren’t worried about many of the medical issues their parents or grandparents may be facing. For this reason, they often only carry catastrophic health insurance or forgo health insurance completely. But even a broken arm or injuries sustained in a minor car accident could result in thousands of dollars of medical bills. The balance
states that if you’ve been on your parent’s health plan that you have 60 days after you turn 26 to find your own health insurance.
7. Not Getting Financial Help
Most millennials probably don’t want to spend money on something they think they can do themselves, but a good financial adviser is almost always worth the time and expense. Whether it’s help on taxes or creating a long-term investment strategy, it’s important to get financial assistance when you’re young to avoid money problems later.
No matter how young you are it’s never too soon to start taking control of your money. Following these seven steps can get you on the road to greater financial stability.