Are you one of the many millennials who face a stream of stereotypes that may not be a reality? If so you may not be the lazy, entitled or narcissistic that people believe you to be. Many millennials are no different from other age groups when it comes to basic finance, but some areas do affect this age group a little more than those that came before it. But the mistakes that they make do cross generational lines more often than people think.
Like many people, millennials often have an extremely limited understanding of personal finance. For many years I have watched professional athletes collect millions of dollars in a short period and the next instant they are flat broke. And this is not a recent development that came about with the millennials but rather crosses all age groups. This lack of financial awareness starts in middle and high school as only a third of the states require a personal finance class to graduate. Then this is further enhanced in college where personal finance classes are also shunned for whatever reason. A recent survey found that 1 in 5 teens lack a basic understanding of financial literacy skills. How can we expect someone to have success with their personal finance if they have no idea how credit, debt or interest works? Of course, there are services and educational information available, but for the most part, millennials have to educate themselves on personal finance matters.
Many people, not just millennials, do not like the idea of having a budget. Well, the truth of the matter is a budget should not restrict your spending but rather explain where your hard -earned dollars are going. This allows you to allocate funds where you need them, notice areas that can be cut and hopefully set you up for the next issue, saving for retirement.
And even if you have a budget, there are no guarantees that you are setting aside enough for a proper retirement that is many decades away. At a minimum, everyone should be saving in their company’s 401(k) plan up to the point that they take full advantage of the company match. If you are not taking advantage of this feature you are missing out on free money and an instant return on your retirement account. At a minimum, I recommend saving 10% of your salary but I have read that millennials need to be saving closer to 20% as retirement will most likely be extremely different for a millennial than a baby boomer or even a Gen X.
Now taxes are an area that is not specific to millennials but is an area that almost no one truly understands. A lot of millennials miss out on the student loan interest deduction or the Lifetime Learning Credit for graduate students. These are tax items that one does not need to itemize to take advantage of and many people are not aware of them. And many people made extra money in different ways, from driving for Uber to side gigs through sites such as Fiverr. All income needs to be reported and the taxes paid on it because no one wants to get a letter from the IRS about undocumented income.
An area that does not just impact millennials is a failure to be consistent in their financial dealings. Where many millennials go wrong is by switching from one financial strategy to another on a regular basis and then maybe switching back to the original one at some point. I live in Nashville and have several friends who are Dave Ramsey followers. Dave has some excellent ideas in his approach to personal finance, and it has and does work for countless people. The issue here is one week someone is following Dave’s advice about avoiding the use of credit and then the next week they are out charging everything under the sun to their credit cards. Doing this is a receipt for a disaster and will end up costing you dearly in the end. Find a method that you like and one that works for you and do your best to stick to that method and not deviate from it.
Millennials tend to think of the here and now living in the moment more than other generations. While there is nothing wrong with this, you must still be wise and make appropriate arrangements for your future, including a retirement that is decades away. But unlike older generations, the millennials do have an advantage that the others do not, time really is on their side.
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