Born between 1980 and 2000, millennials often have a distinctive approach to their financial habits, displaying varying degrees of proficiency when it comes to dealing with money. Some stand as tech-savvy individuals that have amassed great wealth through investments in tech start-ups. However, not all are adept with financial management. Here are five common financial missteps committed by millennials that would be wise to avoid.
1. DEALING WITH DEBT CASUALLY
Being young, you may perceive accruing large debts as a minor issue considering the ample time available to pay them off. Nonetheless, this flawed perspective could trap you in a debt cycle for an extended period. Many graduates are burdened with student loans exceeding $30,000, which coupled with auto loans, can hamper progress in financial management and hinder future prospects like securing a mortgage.
2. DISREGARDING RETIREMENT PLANS
A prevalent oversight among millennials is neglecting to set up a retirement fund. This often stems from the belief that there’s plenty of time to start, and lacking the ideal job makes it less of a priority. Begin your retirement savings now, using the advantage of time to nurture your investments. Despite your age, or your job not meeting expectations, or other financial obligations, retirement savings doesn’t take a backseat.
3. UNDERESTIMATING THE IMPORTANCE OF EMERGENCY FUNDS
Are you always on the edge of your finances? You are not alone. However, the threat of an unexpected expense continually jeopardizes your budget. Although setting aside $1,000 for emergencies might seem daunting, it stabilizes your financial position in the wake of unforeseen expenses like car repairs or a medical urgency.
4. UNDERRATING HEALTH INSURANCE
Young individuals often overlook the importance of health insurance. Granted, you may feel in perfect health, however, medical emergencies carry exorbitant costs. The financial burden that hospitalization due to an accident or severe injury will cause, could cost thousands of dollars. Health insurance coverage is crucial, find options in the marketplace if your employer doesn’t provide it. Balancing your budget may be challenging, but it shields you from significant debt down the line.
5. TREATING CREDIT SCORES CARELESSLY
Healthy credit scores are crucial for various aspects of life, such as securing loans or mortgages or for renting property. Employers, particularly those in security-sensitive industries, may refer to your credit scores prior to hiring. Therefore, it’s vital to use your credit card responsibly, maintain a sensible debt-to-income ratio, and always stay prompt with your payments.
While often criticized by older generations, millennials’ financial blunders tend to be common among all age groups. Recognizing these mistakes and understanding how to avoid them can guide better financial decisions.
Have you ever found yourself down one of these paths? How did you rectify it, and how long did it take?
