The 5 biggest mistakes millennials are making with their money

This original article was written by Kelley Long for Forbes.

People in their 20’s and 30’s are typically mocked by those slightly older than them for being the “snowflake” generation. Having grown up in an era where the focus was often on protecting individuals’ self-esteem, they were often told that they were unique and special and there was no one else like them. I could wax philosophical in defense of this notion or snarkily jump on board with the haters because both sides have a point.

But one thing I’ve noticed in my work as a financial planner working with employees through free financial planning programs offered at work is that many young people are anxious to know if what they’re doing is what everyone else their age is doing. Call it FOMO (fear of missing out), call it peer pressure, call it what you will, but I think that in most areas of life, we often just want reassurance that we’re doing all that we can and aren’t screwing up our future prospects in life too much by living in the present. It’s in this spirit that I’m sharing the top five mistakes I see young people making with their money.

1. Prioritizing paying student loans over saving for retirement. I know that when I graduated from college and my student loans kicked in, the payments had me eating Ramen noodles and reading books by candlelight to save money until I could find a roommate. Student debt is no joke. But I think too many fresh grads get caught up in the media hype surrounding how bad student debt is as a national whole and let that cloud their judgment around prioritizing their finances.

The general rule of thumb is that if you have an employer match in your 401(k) and/or HSA, you should contribute enough from day one to get the full match. It’s worth eating Ramen to get that free money. Beyond that or if you don’t have a match, then it comes down to where your money will work hardest for you. If your student loan interest rates are 6% or less, you’re still likely better off investing that money aggressively for the long-term rather than paying off your loans earlier. Even just eking out $50 per paycheck to save for retirement can make a six-figure difference in your ending balance down the road… as long as you’re not also making the second mistake.


2. Investing too conservatively. Our research shows that Millennials are less likely to have general investment knowledge compared to older generations. Other research has shown that Millennials are more likely to call themselves conservative investors despite having a longer timeline than their older Gen X and Baby Boomer counterparts. That’s mostly due to the fact that they witnessed the largest market meltdown in decades during their formative years, perhaps even watching parents lose jobs AND wealth due to the declining market and economy.

This makes sense, but what you don’t often hear is that the people who rode out the stock market storm of 2008-2009 without selling at the bottom are better off AND THEN SOME by sticking with it. The one guarantee I’m comfortable making about the stock market is that it will go up and down, often wildly, in the coming years. But it’s the best place to invest your money for long-term growth, meaning more than twenty years.

When choosing funds in your account, it really doesn’t matter what each fund has done over the past 1, 3 or even 5 years as long as you confirm that it’s performing in line with its benchmark. Then just let it ride. The easiest solution here? Choose a target date fund closest to the year you’ll turn 65.

3. Turning to credit cards to afford luxuries. Someone recently shared one of her life mottos with me to explain how she enjoys some of the finer things in life without compromising her long-term savings goals. She said, “You can have anything. You just can’t have everything.”

This is a concept that is entirely new for many young people who are the product of dual-income families where most wants were fulfilled growing up. This video makes fun of things like Spotify Premium, Uber rides and Soul Cycle being “needs,” but I also get that these are part of life these days. Plus, at relatively low price-points, these little luxuries don’t seem like an issue, but they add up when money is tight.

It comes down to prioritizing. If you’re unable to pay cash for your manicure or grocery delivery order, you need to find an alternate solution like doing your own nails or taking yourself to the store to bargain shop for your food. Decide which of these things you really want in your life right now and which can wait until later when you’ve paid off some debt and grown your income a bit.

4. Living in a fancy place with no financial foundation. This is one of the bigger financial mistakes I personally made in my 20’s. After living in a dumpy apartment my senior year of college that had roaches and traffic noise that literally kept me up at night, I couldn’t wait to upgrade to a luxury apartment with all the accoutrements. About six weeks into my year-long lease though, I was rethinking that decision (see above regarding Ramen and candlelight). Because I was just starting out in my career with a boatload of student loans, no emergency fund and some credit card debt to boot, I was in a precarious financial situation and was living way out of my league.

There’s definitely something to be said for living in a comfortable, bug-free home where you can get a decent night’s sleep, but jumping straight to the nicest community in town was a mistake. As soon as I could get out of that lease, I found a smaller place that was much more in line with my starting income. When looking for a place to live, decide which things you can and can’t live without in order to meet other financial goals in the meantime. If housing costs are eating up more than 50% of your income, it’s too expensive. Build up your emergency fund before you choose housing that may be a financial stretch for you.

5. Feeling bad about delaying “adulting.” Statistics show that Millennials in general are delaying some of the more typical milestones associated with “adulting,” such as marriage, having kids or purchasing a first home. As one who delayed those things myself, I can relate. I listened to my grandparents and my parents and even my parents’ friends, who constantly chided me not to rush in to being a grown-up because it comes with things like being responsible, paying taxes, holding a 9-5, etc.

While I thoroughly enjoyed the freedom of my 20’s and 30’s, which allowed me to take some risks like starting (and failing at) a business, finding my true calling professionally and finding my true match in a life partner, I also had to battle the societal message that told me I was missing out by delaying marriage, kids and buying a home. And as my husband and I wait, month after month, to conceive our first child, sometimes I confess that I wonder if I did miss out. But then I remember all the wisdom and experience I’ll bring to motherhood, as delayed as it may be, that I wouldn’t have if I’d taken that step earlier.

It’s a mixed message, one that author Elizabeth Gilbert describes as sometimes becoming “paralyzed by indecision.” By making one choice, we are automatically saying no to countless other choices. It’s the beauty and the beast of our modern society, exacerbated by seeing everyone else’s choices play out on social media in filtered, scrubbed ways that can make it feel like you made the wrong choice. The antidote to this extends far beyond your personal finances, but as it relates to your money and avoiding making doozie mistakes, I’ll just offer this: when making financial decisions for yourself, from something as small as buying that Starbucks on the way to work to as big as booking a trip to the other side of the world, stop and ask yourself if you would be making this choice if you couldn’t share it on social media.