“Brilliant people do not make mistakes but mistakes make people brilliant” – Of course this is a great line to read or hear, but deep down the line we all know that money mistakes can derail our financial progress.
Here are the 7 money management mistakes that millennials often make and suffer in their lifetime.
1. Giving no attention to debt:
As per the statistics, students loans have escalated by 84% between 2008 and 2014. In fact, the total student loan debt has already touched $1.2 trillion in 2015. An average student will have $35,000 debt to complete his bachelor’s degree. This figure is $15,000 higher than what students used to owe 10 years back.
To make the situation worse, most students are not even aware of their student loans. Around 28 percent of undergraduates are not even aware of the fact that they have federal student loan debt. Around 6 in 10 students have no clue regarding how much they borrowed in the first year of their college.
Student loan is one of the important reasons why millennials are unable to buy homes and build wealth. So, if you owe money on credit cards, auto loans, and student loans, then it’s best to make additional payments. This will help you pay less on interests. Plus you can get rid of debt soon too.
2. Having an empty wallet for rainy days:
Sixty-five percent Americans don’t save much for their emergency funds. But it is extremely crucial to have an idea about the consequences of not creating an emergency fund.
While most millennials don’t even imagine the possibility of car breakdown or a job loss, yet these are some harsh and expensive realities. If you don’t have sufficient money for emergency fund, then you can get into debt very soon. You may also be forced to borrow from your savings accounts.
3. Giving retirement savings a miss:
Sixty-nine percent of the millennials belonging to the age group of 18-29 don’t save for retirement. They feel too young to start saving for retirement years. This is a deadly money mistake. If they don’t change their saving habits soon, then they will be penniless soon after retirement.
The sooner you start saving for your retirement years, the better for your financial future. Invest in 401(k) plan and take the total benefit of your employer’s match program as well.
4. Buying cheap products to save money:
Poor quality products usually come at low price. However, these products usually make you pay even more in the long run. So, try to pay a little extra for electronic goods like computers and items you use regularly such as mattresses.
5. Not giving priority to credit score:
Too many millennials don’t have a clear idea about how credit score work. This is a complete shock since credit score has been ruling the financial world for the last several decades now. You can’t get a decent credit card with a poor credit score. Forget credit cards, a girl may even refuse to date you because of your poor credit score.
Try to build credit when you’re young since there are several perks of having good credit score. It’ll help you make big purchases in the future. Apply for a good credit card and then use it smartly. Develop good credit card habits and pay bills on time. Your credit score will shine.
6. Being overconfident about health:
It’s easy for millennials to feel overconfident about their health. They overlook the possibility of health issues. This is really bad since medical debts are the biggest reasons behind bankruptcy. It is really essential to purchase a health insurance policy and be financially prepared for a medical emergency. Otherwise, an unanticipated medical emergency can sink your financial boat. What more, you need to pay $325 per person every year.
7. Being not ready to invest early:
Smart investments can help millennials build wealth and become rich quickly. So, it would be a mistake to not invest and make quick money. Apart from retirement savings accounts, millennials can start looking for low-cost index funds. It will help them to accelerate income fast.
Perhaps the worst financial mistake is to depend too much upon credit cards. What millennials don’t understand is the fact that these are highest interest debts. Teaser rates and easy monthly payment plans are nothing but eyewash. Credit cards can give you instant gratification but will cost you dearly.
What is the worst financial mistake millennials make nowadays? What is your opinion?