About 40% of millennials spend more money on coffee than they do investing for their futures, according to a survey conducted by SurveyMonkey. This probably isn’t hard to believe considering the majority of their social media is filled with pictures of overpriced beverages. If what you just read is more relatable than you’d like to admit, you’ve come to the right place. Brush off this, and other financial stigma surrounding millennials, by learning about the most common money mistakes below:
Not investing for retirement
No, that’s not a typo. Although retirement may seem like the least of your worries, it’s important to get your savings started right away. According to a Pew Charitable Trusts analysis of U.S. Census Bureau data, almost half of millennials have no retirement savings. Saving a little each month early on is more beneficial than saving a lot each month down the road. This is due to compound interest, which is calculated based on your balance plus the interest you’ve earned. It’s essentially interest on interest (in other words, compound interest is your friend). Also, if your employer offers a 401(k), take advantage of it. If the company matches what you put in, you’re practically earning free money and your future self will thank you.
Not paying off credit card balances
Going out to eat every other day will please your stomach, but not your credit card bill. According to a new study by the FINRA Investor Education Foundation, over 50% of millennials use their credit cards in expensive ways. With a statistic like that, it’s important to pay your balance in full and not fall into the minimum balance trap. Falling into this trap will sting when you have to start paying interest every month. Also, keep in mind that over 60% of your credit score is determined by your payment history, what you owe, and how much of your total available credit you use.
Not getting an early start on saving
With student loans, grocery costs, and the price of your social life weighing on you, it may seem like there’s no money left to save. Your parents were right about it all, though. The secret to financial success is to save your money, and there’s probably more opportunity to do so than you think. Following the 50/20/30 rule is a great place to start. The rule goes as follows: 50% of your income should go towards essential expenses (housing, food, etc.), 20% of your income should be set aside for your savings, and the remaining 30% is used for lifestyle expenses (concert tickets, another pair of shoes you don’t need, etc.).
Not having a budget
Having a budget may seem like a no-brainer however, according to a study by CHIME, 43% of millennials aren’t using one to manage their spending and savings. Creating a budget keeps you focused on your financial goals. Luckily, there are apps available that can help you with that. These apps will automatically track and categorize your transactions. They will also alert you to let you know what’s happening with your money. Understanding your financial position and keeping track of your spending habits will prevent you from prioritizing your coffee cravings over your future retired self.