Millennials get a bad rap in many ways. One frequent criticism of this generation is that they’re bad with money, spending their earnings on avocado toast and latte art instead of saving up for a house or a retirement account. There are a few kernels of truth to this stereotype, but it’s not entirely millennials’ fault. Their wages don’t have the same buying power as that of previous generations, the cost of living keeps going up, many millennials are saddled with student debt (without the job opportunities that would allow them to pay them off quickly), and a lot of millennials just weren’t ever given a good financial education.
Given these facts, it’s no surprise that millennials are ending up in financial trouble. Even so, recognizing the root causes of the problem isn’t putting money back in their pockets. If you’re a millennial who gets a sinking feeling in the pit of your stomach whenever you pull up your online bank statement, the good news is that you can get back on the right track.
Here are four money mistakes you’ll want to watch out for.
Having Too Many Monthly Fees for Subscriptions and Services
Ten or twenty dollars a month might not feel like much to pay for a single service, but when you combine fees for streaming movies and music, food delivery, dating sites, gym memberships, or any number of other services, all those monthly fees can really add up.
If you’re not watching your bank statement or iTunes purchase history closely, you might not even remember all the subscriptions you’ve signed up for. Some services bill on bi-monthly or quarterly cycles, which can make them even easier to miss.
Do a thorough review of all the active subscriptions you have right now, and cancel everything that you don’t really use, plus anything that doesn’t really give you your money’s worth. If you end up really missing something, you can always re-subscribe, but chances are you’ll be happier to have that extra money in your pocket instead.
Pursuing Expensive Hobbies
You’ve probably been encouraged to do the things you love, follow your interests, and pursue the hobbies that you really enjoy. Those are all important pieces of advice; however, many popular hobbies require a fair amount of investment to get into.
Collecting is one of the most dangerous hobbies from a financial standpoint. No matter what your fandom of choice is, there’s probably way more merchandise than you can ever possibly afford, and trying to keep up with every new limited-edition release can leave you in a deep hole of debt.
“Active” hobbies aren’t necessarily better when it comes to finding ways to separate you from your money. Hiking, fishing, camping, and other outdoor pursuits can lead to purchasing all kinds of expensive gear and equipment if you’re not careful about it.
Giving up your hobbies entirely isn’t the answer, obviously, but don’t let something that’s supposed to be enjoyable turn into a source of financial stress and worry. Set a monthly hobby budget you can realistically stick to, and look to save money by buying secondhand equipment and apparel when you can.
Getting Stuck with Lots of Debt
Student loan debt is a huge burden for many millennials, and if you’ve graduated from college it might be too late to do anything about it (other than make it a priority to pay it off as speedily as you can). If you’re still looking at furthering your education or getting a postgraduate degree, it’s worth taking a hard, careful look at whether the debt you’ll be taking on to finance your continued education is going to help you obtain a career that will allow you to pay it off
Consumer debt can also be a big problem for millennials, who are often able to easily obtain high-limit credit cards before they’ve gotten any real information about how interest rates and credit scoring will impact their future. On the other side of the coin, millennials who avoid credit cards because they’re afraid of ending up in debt may not be building up the good credit history they’ll need to make major purchases later in life, like a home.
If you’re carrying any kind of debt, paying off as much as you can afford every month without fail should be one of your top financial priorities. You also need to make a budget based on your income, and stick to it to avoid accumulating it again.
Not Establishing Financial Goals
If you haven’t made any solid financial goals for yourself, it’s easy to rationalize an impulsive or luxury purchase. After all, what’s the point of having money if you don’t spend it? Well, if you’ve got a plan for buying a home, funding your retirement, having a family, starting a business, or anything else that might require saving up some money, you’ll have a sound basis for making smart decisions about where you really want your money to be going.
Once you’ve figured out what’s really important to you, why you’re working hard for the money you’re making, and what you most want to do with it, making a budget and cutting unnecessary expenses won’t feel like arbitrary rules intended to keep you from having fun. You’ll know that being smart with your money is bringing you closer to realizing your dreams, one dollar at a time.