Making bad money mistakes when young can really come back and bite you in the ass as you get older. Sure, we all grab a couple credit cards in our early-20s when we start making real money from a job, drop a couple thousands on a dream vacation with some buddies and then spend the next few years trying to pay it off, but there are some financial decisions that can be absolutely killer when it comes to financial success.
Given the fact we live in a day and age where it takes two seconds to spend hundreds or thousands of dollars with a quick click on an app, it can be difficult to avoid bad money mistakes. But that just means disciplining yourself much more, and understanding what you should avoid when it comes to spending.
To help, Business Insider spoke with some financial experts about some of the most common money mistakes that millennials are making. Since most of us spend cash on similar things — and do so in the most binge-worthy way possible — it just seemed appropriate to give you some insight as to what you should try to stop doing to help out your future financial success.
1. Stop being so carefree with spending now, then playing catch up by paying things off later.
“One huge mistake millennials make is taking a carefree approach to their money when they are young and then finding themselves having to fix bad habits or play catch up later on when they are peaking in their career or receiving an inheritance or a windfall of money,” Ashley Dixon, CFP at Gen Y Planning, told Business Insider.
Essentially, the earlier you learn how to save money, the better off you’ll be. Yep, that even means cutting out those $5 lattes every single day that you don’t think are impacting your bottom line much.
2. Stop creating and living a lifestyle that’s more about spending and not saving.
Spending all your income before saving any of it can create a snowball effect, Dixon said. “If you buy or rent the house, the car, the clothes, and the food based on your entire income and there is nothing left over to save for your retirement, an emergency, or a vacation, you will be forever searching for more money or have to be digging yourself out of debt.”
That means you should get into a good habit with saving, with Dixon recommending putting aside about 20 percent of your monthly paycheck for dedicated to just that, whether it be into a 401(k) or something else.
3. Stop avoiding giving any attention towards your credit score.
“Millennials are simply not aware or interested in credit,” Yoni Dayan, chief editor of Money Under 30, told Business Insider. “Credit is a double-edged sword – having good credit can make loans and mortgages much cheaper; bad credit can sink you. Millennials need to start caring more about their credit score. Now is the time to start massaging it, so that when they’re ready to make a big purchase they’ll be reaping the rewards.”
This doesn’t mean you need to constantly check on things every other day, but you should be aware of what your credit score is. Remember, your credit score can impact things like getting approved for rent or a mortgage, loans or opening up a new credit card, so it’s important to pay attention to.
4. Stop avoiding having an emergency fund.
“Millennials can combat being unprepared for out-of-the-blue or unforeseen expenses by creating an emergency fund,” Dayan said. “This may seem daunting but by setting aside a small amount each month, millennials can be confident in their financial health and ability to address unpredicted expenses.”
It’s critical to have some sort of money somewhere, anywhere, just in case an unforeseen circumstance comes up. Loss of job, unfortunate hospital bills or travel, even something that can be used for bills if you had an expensive month prior, having an emergency fund goes a long way to easing tension for when life throws financial curveballs at you.
Look, we’ve all made plenty of money mistakes in our lives — and we’ll continue to do so. But it’s about avoiding repetition and learning from any bad financial decisions so not to bury yourself into debt-inducing stress or limiting what you can and can’t purchase. To read the full article for other tips from experts, head on over to Business Insider.