Despite making more money than our parents’ generation, many millennials are still behind when it comes to their finances. Their financial future might be in jeopardy unless they realize the changes that need to be made in their money management. To make the wisest decisions in our finances, it’s important to know these five mistakes most millennials are making with their money.
1 – No plan for their cash flow
Money comes in. Money goes out. Oftentimes, there is no record of most of these transactions. And we are left wondering where all of our money went by the end of the month.
Sometimes the word “budget” can seem scary and intimidating. Whatever we choose to call it, we must have a plan for our cash flow or it will flow right out of our hands and we will never win with money.
Being unintentional in our planning and our spending will rob us of our greatest wealth-building tool – our income. Check out the NFCC Monthly Budget Planner to help you get started on an easy monthly cash flow plan today.
2 – No money in savings
According to a GoBankingRates survey, less than 69 percent of Americans have at least $1,000 stashed in a savings account for emergencies. Thirty-four percent have nothing at all saved!
Emergencies happen. They are just a part of life. At some point in the next decade, most millennials will face a major life event such as a car breaking down, a job loss, or a major accident or illness. By not having enough money saved to prepare for these unexpected circumstances, many are one emergency away from financial disaster.
At the very least, every millennial should strive to save $1,000. Many experts recommend an emergency fund that will cover three to six months of expenses should the unexpected happen.
An easy way to build your savings is to make it automatic. Start saving a small percentage of each paycheck and you’ll be pleasantly surprised as you watch those savings grow little by little over time.
3 – Using credit for everything
Credit cards can be a great tool, if used responsibly. The problem our generation is facing is that most millennials use their credit cards for almost everything. Clothes, shoes, coffee, groceries, vacations, entertainment – Just charge it!
This “buy now, pay later” mentality can come at a cost. High interest rates and never-ending minimum payments can steal hard-earned money that should go towards short-term savings or investing for retirement. Which brings us to our next big money mistake…
4 – Failing to invest for retirement
Many millennials have delayed investing for retirement. Or they aren’t investing at all! Waiting for a higher income, lower rent, or until being married with children is a big mistake.
Starting retirement savings now will ensure you are set for success in your golden years. Even $100 a month starting in your early twenties will grow to a very large nest egg after a couple decades. Due to the wonders of compound interest, saving more today allows us to pay less out of pocket while still having more savings come retirement age.
5 – Don’t see the big picture in their finances
Thinking only of today gets a lot of millennials in trouble. When we aren’t thinking about the big picture of our finances, it is easy to see our hard-earned money slip through our fingers.
Set financial goals. Make a plan for your monthly income. Track your net worth. Learn a little bit more about investing for retirement.
Being aware of where we stand financially and being honest about our progress is half the battle. When our mindset is focused on the future, it is easy to make the wisest decisions with our money today.
All the money in the world won’t be worth a hill of beans if it isn’t managed well. Make sure if you are making any of these money mistakes, you take steps to fix them now. The NFCC Financial Education page has many resources that can help. Do one thing to better your finances every day and you will be well on your way to a successful financial future.
About the Author: Krystal is a teacher turned blogger. She recently paid off over $80,000 of debt with her husband, and now writes about making family finances simple. You can read her debt free story, as well as tips for budgeting, paying off debt, saving, and investing for beginners at Simple Finance Mom.