4 money mistakes millennials can easily fix


Yoni Dayan

Yoni Dayan

Blog author Yoni Dayan

Published November 30, 2018|5 min read

Policygenius content follows strict guidelines for editorial accuracy and integrity. Learn about our

editorial standards


how we make money.
News article image

Millennials may not have the best reputation for a lot of things, including managing finances. And contending with crippling debt and a recovering economy certainly doesn’t make things any easier. But excuses aside, there are small, easy changes that we can make now to set us up for a stress-free financial future.

Here are four common money mistakes millennials can fix.

1. Not budgeting

Previous generations were all about long-term financial planning. But it was also much easier to make realistic financial predictions with the luxury of growing up in a more stable economy.

With a less stable job market to compete with, it can be harder to land on our feet, let alone start thinking about our future. This has deterred many of us from creating and sticking to a financial plan. (You can read about how one millennial budgets here.)

Why not budgeting is problematic

The truth is, people in a less steady financial state need to be even more diligent about tracking their finances. When you don’t have a clear understanding of how much you can afford to spend monthly, you’re more likely to spend beyond your means. This puts you at a greater risk of incurring debt, which could potentially have a lasting impact on things like your credit score.

Without a plan, it’s impossible to be prepared when something unexpected happens, like a job loss or medical emergency. Sticking to a budget makes it easier to set aside spare funds in case something does happen.

What to do instead

Simply start tracking your money. There are many amazing resources out there to make budgeting super easy, including this free budgeting spreadsheet.

2. Waiting to invest

Many young folks believe the small contributions from their starting salaries aren’t worth investing. They’d rather just hold off until they start earning a more sizable income.

Why waiting to invest is problematic

When it comes to investing, time is one of the most valuable resources. When you give your investment time, you can get the most out of each dollar. It’s the rule of compound interest. You don’t only earn interest, but over time, you also earn interest on the interest you’ve earned. Time is a powerful tool that can make your money grow.

What to do instead

Again, get started now. It doesn't have to be a big investment or anything that creates a massive strain on your bank account. Every month, contribute what you can and you’ll be surprised at how much you accumulate over time.

Investing really doesn’t have to be that complicated, as there are plenty of resources to help you learn how to invest. Speak to a financial consultant at your bank about your options. There are also amazing tools out there to get even the most inexperienced investor into the market, including low-fee robo advisors that will put your investments on autopilot for you.

3. Sticking to low-risk investments

Millennials may not have the reputation for being prudent financial planners, but interestingly enough, we do tend to avoid risk when it comes to investing. According to a 2018 investment survey by global asset management site, Legg Mason, 85% of millennials reportedly invest in much lower risk investments.

Why sticking to low risk investments is problematic

While it’s good to be cautious when investing, sticking to low risk investments will earn you a much lower return. Most young people have at least 30 or 40 years until they retire and need that money, which is plenty of time for riskier investments to recover from potential short-term losses, ultimately yielding higher returns.

What to do instead

First and foremost, do your research and stay informed. Don’t start investing in anything you don’t understand. High-risk doesn’t mean buying your friend’s new cryptocurrency. Consider looking into investment options that may be a little volatile in the short-term, but could yield greater returns later on, whether you’re investing in a startup or emerging market, venture capital fund, higher-risk mutual fund, or a penny stock. You can mitigate the risks by diversifying into a mix of low- and high-risk investments.

4. Avoiding building credit

There are plenty of reasons why people avoid this one — whether you're shying away from it because you're still chipping away at student debt, paid off your student loans and don't want to deal with any debts again, or simply because you don't understand credit, you could actually be doing yourself a disservice. Here are some good behaviors that can actually mess with your credit.

Why avoiding credit is problematic

Taking out a loan, opening a new line of credit, or using a credit card are actually ways you can help build credit. And then consistently paying what you owe demonstrates your credit-worthiness.

When you avoid building credit, you have no tangible way to prove you’re financially responsible. It may not be immediately obvious how important your credit is, but this three digit number comes into play a lot. From renting an apartment or applying for a mortgage, to getting a car loan or even applying for a job, lots of important things in life come back to your credit score.

Plus, when you avoid credit, you miss out on some of the great benefits, including rewards for spending money (hello rewards credit cards).

What to do instead

If you’re scared off by loans, start by applying for a credit card. Keep in mind, you should only do this if you are confident you can pay what you charge on it every month. Don’t be nervous about qualifying if you have no or low credit. There are cards out there that are designed to get you started, like secured cards. It is important to note that these cards do ask for an initial deposit as collateral. You could also be added as an authorized user on someone's account.

Your credit is just one of the important adult things to be keeping an eye on. Here are some other things you should be checking on the reg.

Image: Tempura