Biggest Money Mistakes for Millenials
Being a 20-something can be some of the best years of your life. There is a great feeling of accomplishment that comes as you reach your first milestones after college—enjoying graduation, getting your first full-time job, and finding your first postcollege apartment all top the list. However it’s also a time that can bring immense feelings of anxiety, questions like: Can I manage paying my student debt and saving? How will I afford health insurance and do I really need to start planning for retirement this early?
These crucial decisions millennials encounter can be overwhelming, and many will defer making these choices until later when they are closer to 30, but being too conservative or hasty with money and continuing to delay these critical decisions can have long-term financial consequences that significantly reduce your bottom line. Financial Advisors from TIAA recommend millenials steering clear of the following financial pitfalls.
Running up huge amounts of debt: Remember, your income at this age is not strong. Adding credit card debt or car loans, in addition to student loans, can get you in over your head fast—especially when you add on interest! One rule of thumb: credit is not income, it has to be repaid. Don’t fall for one of the biggest money mistakes by using credit or loans to offset a low starting salary; and your student loans shouldn’t total more than your expected entry-level salary.
Not planning for the near future: Emergencies happen, so you have to be prepared.A good emergency fund should cover three to six months of living expenses. You should also have separate savings accounts for things such as car replacement and job loss. So set yourself up accordingly because being unprepared can set millennials back quite a ways.
Grad School or No Grad School: It’s important for millennials to be strategic about graduate education. Weigh the job placement rates and average starting salaries against cost of financing and student aid options to see if the math works. Pursue options that help you avoid more student loans, such as working part time or being a teaching assistant.
Skipping health insurance: Whatever you do don’t skip the health insurance! Many millennials avoid purchasing health insurance altogether with the idea that they’re young and don’t need it yet. But the truth is, unexpected illness or injury can be so expensive, that the prices of premiums are totally worth it.
Being Afraid to Invest: Time is on your side, the earlier you start investing, the more time your money has to grow. Being well diversified is also important; don’t go all stocks or all bonds. Both can result in investment disaster by being too risky or too conservative which equal less profit for you over the long term. Assess your risk tolerance.
What are your biggest financial fears as you prepare for graduation this spring?