People make common money mistakes all the time. Managing money comes easier to some than others. It also evidently comes easier to some generations than others (cough,* millennials).
Millennials, who account for about 72.1 million of the population, notoriously struggle in the money-management department. But, hey, it’s not all their faults! Millennials are confronted with a lot. From the rising cost of living coupled with burgeoning student loan debt and not-so-ideal unemployment rates. Never mind that older millennials bore the brunt of the Great Recession with a near-impossible job market and suffocating stagnation.
After all, millennials earns an average salary of just $47,034 a year (or $905 a week). That’s an estimated 20 percent lower than that of baby boomers at the same age, according to a SmartAsset study. It makes sense why most millennials rent instead of buy because, well, most just can’t afford to own homes. In fact, according to Apartment List’s “2019 Millennial Homeownership Report,” 12.3 percent of millennial renters say they plan to “always rent.” That is up a fair bit from 10.7 percent just one year ago. Most can’t chalk up enough money for a down payment because they have no significant savings—if any savings at all. Others cite crippling student loan debt as a reason why renting is the more feasible option.
According to a recent survey of 1,000 adults ages 33 to 40 in the United States, conducted by The Harris Poll on behalf of CNBC Make It, millennials have taken out an average of $21,880 in student loans. Of them, just 32 percent have paid off their debt in full. This means that the large majority are still paying off their debt about a decade later. While a higher education does afford Americans more liberties, like higher-paying jobs, improved job security and even a longer life expectancy, more than half (52 percent) say that none of it is worth it when they’re drowning debt.
Now fuel the fire with already-high unemployment rates only exacerbated by an unprecedented global pandemic that’s wreaked havoc on the economy and claimed lives around the world. Among millennial college graduates, unemployment and underemployment are at 8.8 percent and 18.3 percent, respectively, according to Deloitte research. These numbers are historically higher than those of prior generations. According to the Pew Research Center, 35 percent of Americans between 18 and 29 years old, and 30 percent of Americans between 30 and 49 years old, report that they or someone in their household lost their job amidst the COVID-19 crisis. In fact, data suggests that millennials have been hit the hardest.
In short: Millennials are trying to make ends meet in what has become known as “The Great American Affordability Crisis” that’s, frankly, only gotten harder in our “new normal” amid the pandemic. If you’re a millennial and this resonates with you, there are some common money mistakes you can be avoiding to aid your efforts.
3 Common Money Mistakes Millennials Make
Avoid making these money mistakes, and you’ll have a better shot at surviving (and thriving!) amongst the mayhem.
1. Using all your spare income to pay off debt.
We’ve said it before, and we’ll say it again: You should still invest even while paying off debt. We get it. You have student loans. Credit card debt is piling up. And you have bills to pay. In fact, most Americans worry about their financial futures, according to research by John Hancock Financial.
But you don’t need a lot of money to get started investing, and you really should get started investing sooner rather than later. Investing early has long-term benefits. Your money grows over time and outpaces inflation. It would not do this sitting in a savings account. So, if you solely focus on paying off your debt without investing any of your spare dollars, you may end up with a whole lot of opportunity losses.
After all, a study by Northwestern Mutual suggests that one in 10 Americans believe that they’ll be in debt for the rest of their lives. So if you wait until you’re not stressed about money to start investing, well, you could be waiting a lifetime.
2. Allowing sneaky charges to creep up on you.
Most millennials have a ton of subscriptions. After all, we grew up in an online era. Think: Netflix and Hulu, Amazon Prime, LinkedIn Premium, etc. In fact, on average, consumers pay $237.33 per month on a suite of subscription services, according to a study by West Monroe. That equates to $2,847.96 every single year. Yup… Let that sink in for a moment.
Now ask yourself: How many of these subscriptions that you no longer use are still quietly charging you every month? Probably a fair amount. But when is the last time you actually tracked what you’re unnecessarily spending every month? Going through your monthly statements and smartphone subscriptions can help you identify recurring charges that you really don’t need to be paying anymore—or at least not right now. Consider which subscriptions you can cancel or pause for the time being.
3. Being lazy with your spending habits.
We know, we know. Millennials have grown up in a world in which it’s so easy to have everything at our feet without having to lift a finger. (Including top-performing, AI-powered investment kits through Q.ai…) But there are some things that are still better left doing yourself, at least some of the time. Just because you can order takeout or go out for every meal does not mean that you should. Just because you can send someone your laundry to wash and fold for you doesn’t mean that you should. And just because you can delegate your household chores to someone else doesn’t mean that you should.
Buying groceries to cook yourself, taking care of your own laundry, cleaning your own house… these are all ways that you can save money. Sure, sometimes there just aren’t enough hours in the day—especially with many millennials working more than one job to make ends meet. But, if you can carve out the time to take these extra steps, you could save yourself money each week that certainly adds up over time.