Millennials are generally regarded as being a bit more conservative when it comes to money. Perhaps that’s because they are usually the ones who face overwhelming financial challenges like unemployment for recent college graduates, hefty student loan debt or earning salaries that are less than desirable. It forces millennials to be the wisest generation when it comes to money since people who lived through the great depression. However, individuals in their twenties and thirties are also making certain financial decisions that they are simply getting wrong. Here are four of them.
Prioritizing Student Loans Over Saving for Retirement
Although being in debt, especially with hefty student loans, is no joke, it’s just as important to focus on the future as it is the present. While monthly payments to pay off the loan debt may be strapping you for cash, it’s still absolutely essential to think about your retirement, even in your twenties. It’s important to follow the general rule of thumb that dictates that if your 401(k) from your job has an employer match, you should contribute as much as possible from the first day so as to get the full match. Even if that means you won’t be able to eat out as much or go to the movies much, it’s certainly worth it. At the end of the day, the money will work harder for you. Putting down even the bare minimum of $50 per paycheck toward your eventual retirement will make that much of a difference in the long run.
Many millennials think they can save more money by skipping on getting insurance, be it health insurance or renters insurance. That can prove to be a huge and very costly mistake. You never know when disaster might strike and leave you ill or injured or struggling after a fire or flood has struck at your apartment or house. In the long run, having insurance to protect your health and your rental home is definitely worth the extra money. You can get insurance quotes online to compare your options. Always be wise about choosing the right insurance policy that fits both your needs and your budget.
Relying Too Heavily on Credit Cards
Too many millennials make the financial mistake of relying too heavily on credit cards. This is especially the case when they choose to purchase luxuries that they otherwise might not be able to afford. Although you might want to enjoy the finer things in life, you have to ask yourself certain questions: Can I really afford this? Do I really need this? It’s important to answer those questions seriously. If the answer to both is “no,” then you should skip the luxuries because they are actually unnecessary. Instead of riding around town via Uber, signing up for a premium version of the streaming music service of your choice or buying a brand new car, consider taking a bus, using a free streaming music service and getting a good used car. It will save you plenty of money and avoid the unnecessary burden of debt at the same time.
Investing Too Conservatively or Not At All
Finally, another financial decision millennials get wrong is that they either invest too conservatively or not at all. This is a generation that lacks knowledge of investing compared with older generations like Baby Boomers or Generation X’ers. Millennials choose to be more conservative about investing their money because they think they will end up with more in the long term. This is most likely because they got to see firsthand the worst market crash a few years back during the decline of the economy. However, the best way to invest for long-term growth is to be riskier due to the fluctuation of the market. It’s important to think about long-term growth, rather than the here and now.
These are the four financial decisions millennials get wrong. If you are a millennial who works toward correcting these mistakes, you will definitely benefit in the future in a big way.