9 Biggest Mistakes Millennials Make Financially

As a Millennial, you often hear Boomers and Gen X-ers talk about how we are terrible at managing money as if they had it all figured out when they were our age. The thing is, they didn’t. Many of them made mistakes just like us. It’s a part of growing up. However, we have the opportunity to learn from the mistakes of those who came before us. Here are 9 financial mistakes you as a millennial can easily avoid.

1. Not Tacking Spending

It is easy to get caught up in everything that is going on in life and forget to track your spending. But with today’s technology, there’s no excuse not to. You can make it easy for yourself by using an app to do it. This not only allows you to see and understand where your money is going, but it also can help keep you accountable when your spending gets out of hand.

Check out my post on Budgeting if you want to learn more on how to do it yourself!

2. Living Above Your Means

Keeping up with the Jones’ is a real thing. Everyone wants to have trendy clothes, a nice car, and fun trips to talk about. The problem is we don’t all have the same income. If you are constantly worried about having the next cool thing, it will make it hard to live below your means. Ultimately, the key to feeling ‘financially free’ is to consistently spend less than you make and live below your means.  Figure out the few things you truly care about and spend the extra money on them and then lower spending on things that don’t actually matter to you

3. Neglecting Emergency Savings

Another common mistake is the lack of an emergency fund or what I call a ‘cushion fund’. Emergencies or unexpected large expenses, such as medical issues or unexpected car repairs, can lead to financial stress if there are no savings to fall back on.

Aim to save at least three to six months' worth of living expenses. Begin by saving a small amount from each paycheck and gradually increase it. Its best to set up a separate savings account and automate the savings into this account dedicated to emergencies.  

4. Delaying Savings for Retirement

Many millennials delay saving for retirement, assuming they have plenty of time.  The longer you delay retirement savings, the harder it will be to reach the amount of money you need to retire.

Begin contributing to KiwiSaver as soon as possible, making sure you at least contribute enough to get the full government contributions.

5. Not Taking Advantage of Your KiwiSaver

One misconception I often hear is that people choose to not contribute to KiwiSaver because they think that the Government holds your money and if they disestablish the scheme your money will be lost. THIS IS NOT TRUE. The money invested in and your contributions into KiwiSaver are yours. Consult an advisor to figure out what the best option for you might be.

Think of it this way, if you are not contributing to your KiwiSaver and your employer has a match, you are missing out on a large amount of your compensation. If you make $100,000 a year and your employer has a 3% match and the Government put into .50c for every dollar you put in (up to a maximum of $521p.a) and you choose not to contribute anything, that means every year you don’t maximize your employer and the government contributions, you will miss out on $3,521 your employer and the government would contribute towards your KiwiSaver. Don’t leave that money on the table!

6. Being Too Conservative or Too Risky with Your Investing

With the accessibility of investing, many millennials are choosing to do it on their own. For some people this is great, but for others, it can lead to problems. There are countless stories in the media of young investors choosing to try high risk investing strategies and ending up in a bad place. Remember, investing is not gambling! Keep it simple.

As you can tell, taking too much risk can lead to problems, but so can taking on too little risk. If you choose to leave your large sums of money in Conservative KiwiSaver or investment accounts, you will end up missing out on long term growth in the market. And, on top of that, inflation will be eating away at those dollars making them less valuable. Figure out your risk tolerance and then invest according to that to prepare for your future! Millennials often avoid investing due to a lack of knowledge or fear of risk. However, investing is crucial for building wealth over time and beating inflation.

7. Having a Family but Not Having a Will Put in Place

Estate planning often gets swept under the rug and pushed off until later. The problem is, later never happens. Go get your will done now! It is one of the most important things you can do for your family. A will allows you to choose who would care for your children, where all your prized possessions would go, and saves your loved one’s stress and costs! 

8. Not Insuring Against Proper Risk

Things happen in life that are unexpected. As horrible as these crazy situations are to even think about, imagine if it actually happened to you. Life would change. Maybe you wouldn’t be able to work. Maybe you would no longer be here with your family. None of us want to think about these things happening, but the truth is that they do happen. Make sure you get the proper insurances place so that if something does happen, you and your family are protected.

9. Not Having a Plan in Place

There are certain situations in life where winging it actually works. Personal finance is not one of them. The most common thing I hear as an adviser from older clients is “I wish I would’ve started planning sooner.” The earlier you start planning for retirement, a house, kids, etc. the better.

I always like to compare it to someone trying to get in shape and lose 10 Kgs. Would you just show up at the gym and then all of the sudden be 10 Kgs lighter and then stay in that shape for years to come? No! You would need to create a nutrition plan, an exercise plan, and then actually go out and do it while making changes to your plan as injuries and soreness occur. It would be hard even with a plan.

Plans are crucial to reaching your desired outcome! Do your best to get a plan in place early and then tweak it as your life changes.