Here are the top 10 financial mistakes millennials often make and how to avoid them.
1. Ignoring your budget.
There are two ways you can go wrong with your budget: Either not having a budget or not following your budget. Getting a handle on your income and how your monthly expenses add up can give you perspective on your spending. Once you have a budget and understand where your money is going you can make choices about whether or not you can afford any extras. Ignoring your budget is one of the fastest ways to get in over your head with money mistakes.
2. Misusing credit cards.
Credit cards can be great tool to help you make purchases with ease. The trouble is purchases, both big and small, can be made without a lot of thought and the next thing you know you have a balance that's bigger than you can pay off at the end of the month. When balances go unpaid, you incur an interest charge. While once in a while, or for an emergency, an interest charge can be manageable, unpaid balances can accumulate and so does interest.
3. Living lavishly.
You've got to have a roof over your head so a mortgage or rent payment are a large portion of almost any budget, but often times millennials take on housing expenses that are more than their budget can manage. Being realistic about your needs and wants when it comes to housing can help you determine the appropriate percentage of your budget to allocate to your choice of home and ensure you have money left over for other essentials and a little fun.
4. Not saving for emergencies.
Life takes unexpected twists and turns. You never know when the car will need to have the brakes replaced, plumbing emergencies will arise or travel expenses will be necessary. Setting aside money each month to cover life's surprises will not only help you make good financial decisions, it will make dealing with the emergencies less stressful.
5. Overlooking the little things.
A latte on the way to work, lunch out each day, more data on your mobile plan, daily and monthly expenses that seem like a few bucks here and there can really add up. Taking time to track some of your regular spending might help you see that cutting back on some of the little things can have a big impact on your budget.
6. Joining hearts and accounts too early.
When you find someone you like to spend time with, it can be tempting to merge your lives so you can maximize the time you have with one another. While moving in together might cut your living expenses in half, merging bank accounts or credit cards too early can have lasting financial effects.
"Important discussions about who will be responsible for what and how you feel about debt and large purchases are fundamental before you agree to take on the results of someone else's financial decisions," says Scheidt, EVP for Oklahoma Central Credit Union.
7. Failing to plan for the future.
Whether planning for the future means starting to save for retirement or just deciding to be intentional about setting money aside for an upcoming trip or event, thinking beyond the current month or year is an excellent financial strategy. Seeing the big picture helps the day-to-day budget management become more important and impactful.
8. Signing up for auto payments.
If you have a good handle on your spending, setting up monthly auto-payments for items like cellular plans, utilities and necessities can seem like a smart move: no more needing to remember to pay the bill on time. But if you go out with friends and pick up the tab and forget the water bill is being withdrawn tomorrow, you can easily overdraft your account and incur fees.
9. Not paying taxes.
Skipping out on Uncle Sam is a bad idea. While staying current on your taxes might be difficult if you owe money, the ramifications of not paying can have a lasting impact on your credit.
10. Making poor investments.
Maybe it goes without saying, but get-rich-quick schemes are probably too good to be true. Working with a professional financial advisor and investing in funds and accounts that have proven returns is a great way to make your money work for you.
It's never too late to get on track with your finances. Avoiding or solving these financial mistakes can be the springboard to building a better financial future. If you aren't money wise yet, work with a professional financial advisor and take steps to improve your finances. Making good financial decisions today means you can enjoy your money tomorrow.