Millennial Money Mistakes You Can’t Afford To Make

Your early 20s is often a defining time in your life, especially when it comes to money. Once you’re out of college and making your way in the working world, you finally have money to spend. However, many millennials fall into the classic pitfall of financial mismanagement.

There are specific mistakes that you can’t afford to make, and they don’t just apply to those in their early 20s. Anyone can benefit from these personal finance tips. Here’s some advice on avoiding these common pitfalls and remaining financially stable. Here are millennial money mistakes you can’t afford to make:

1. Not Saving Enough

One of the most common millennial money mistakes is failing to save your money. When you’re no longer living off college loans, and you finally have some income, it can be tempting to spend it all. However, falling into this habit can ruin your finances fast.

Make sure you open a savings account as soon as possible. These allow you to keep your money safe and earn extra interest. Instead of spending your money, put as much into your savings account as possible after your necessary expenses, and leave it there. You could be making an extra few hundred a year just by saving!

A lot of banks have special accounts for graduates. You can even find one that allows you to earn money back on whatever you spend. Compare bank accounts online and make sure you get the best deal. 

2. Failing to Invest

Millennials often make the mistake of not educating themselves on investing. You’ll need to build up a healthy bank balance first before you consider investing. However, the earlier you learn about it, the better.

There are various investment options for millennials. One of the safest is an IRA, an account that allows you to save (tax-free) and gain extra money on your savings.

You could also look into investing in stocks or equity in companies. These can involve more risk, but if you’re willing to do your research, you could make substantial returns. You could even use websites like Wefunder and Seedrs which allow you to invest in crowdsourced startups and gain money back as they grow.

3. Renting Instead of Buying

Of course, one of the greatest and safest investments you can make is in real estate. However, a Pew Research Center analysis found that more than one-third of Americans rent their property, more than ever before.

Renting can be particularly helpful when you’re first moving into a place of your own and need to build funds. It’s also useful for those who don’t plan to remain in the same location for too long.

However, once you’ve built up the funds and are in a stable position, you might want to consider buying instead of renting. Not only will it give you a place to live, often with lower monthly costs, but it’s also an investment that’s likely to grow significantly over time.

4. Borrowing Too Much Money

One of the most significant financial pitfalls millennials face is borrowing too much money. Between student loans, personal loans, and even cash loans, they can quickly end up with more debt than they can handle.

Payday loans can be especially problematic. A Pew Research Report found that 12 million Americans a year turn to payday loans when they need quick cash. However, these often come with substantial interest rates.

It’s crucial to avoid borrowing money whenever possible. If you must get a loan, then get one with the lowest interest rate you can find. Asking a friend or family member willing to lend you money can be much safer than taking out a cash loan.

5. Avoiding Paying Off Debt

In addition to borrowing too much, millennials often let their debt mount up until it’s unmanageable. The longer you fail to repay loans, the more the interest costs will rise. Over time, this can have drastic consequences for your finances.

Many people tackle their debt by paying off the smallest one first. Each month, you can put any extra money into quickly eliminating one balance. By doing so, you can stop the interest mounting up and start taking on the next debt. It can also be helpful to tackle your highest-interest loan first.

Some people also consolidate their loans so that they can pay them all off with one monthly payment. This method often works out better for their finances. Work on saving more and tackling your loans instead of letting more debts add up.

6. Not Making Extra Income

As soon as you’re out of college, you should aim to earn money as quickly as possible. Even if you don’t manage to find a well-paying graduate job, you should get any job you can. However, if you feel like you’re selling yourself short, make sure always to keep aiming higher.

If you’re performing well at your job, don’t be afraid to ask for a raise. Many people fail to earn what they’re worth because they don’t ask. If you know you could get a better job and you’re not getting paid enough, request a raise or look elsewhere.

You should also find ways to earn extra income on the side. Many people earn passive income by selling things online. You could also sell your skills on a freelance basis. If you can create graphics, write well or have a particular talent, you could make good money on sites like Upwork and PeoplePerHour. 

You could even look into getting a side job as an Uber driver to make some extra income. Even if you only earn a little extra cash each week, it can often be enough to cover your groceries and some luxury expenses.

Conclusion

If you don’t learn to manage your money fast, you can end up losing it more quickly than you gain it. Make sure you don’t fall into these typical millennial money mistakes and use your funds wisely.

Once you’re earning, make sure to start paying off your debt and put your extra income into a high-interest savings account. To cover your weekly costs, try making some extra cash on the side. Make sure you don’t overspend either- make a weekly budget and work out where you can cut costs.

The more you work on being financially responsible, the wealthier you’ll be in the long run. Use this advice and keep your finances healthy for the future.