For many of us, it can be complicated to decide precisely how to manage our money. Money management can be one of the most challenging tasks we face every day. Regardless of the strategies we try, the amount of income we have, or the extent of our budgets, we may feel that we have never made the best possible decisions for our financial future.
Sometimes the mistakes we make are not even conscious choices. Much of the time, millennials make money management mistakes simply because we don’t know all the strategies and options out there.
Regardless of the causes of our mistakes, whether by conscious choice or lack of knowledge, many young people do not even realize that their decisions affect their financial health until it is too late. To combat scenarios like this, we have made a list of the five biggest money mistakes that millennials make every day.
Philip Barach is a U.S based investor in fixed income and real estate. He cofounded Doubeline Capital with Jeffrey Gundlach. He also served as Doubleline Capital’s President until his retirement in 2020. Together with Gundlach, he was the co-portfolio manager of the flagship total return fund and was a manager of ETF TOLT, the State Street active bond.
Furthermore, Barach co-founded and is the TCW mortgage group’s former Group Managing Director. He co-founded and co-manages a privately held real estate investment firm engaged in the acquisition and active management of multifamily and commercial property throughout California and the Pacific Northwest with his son, Jonathan Vista Investment Group. Barach was also the CEO of NYSE REIT’s Apex Mortgage Capital.
His experiences put him in a governing position on the subject of money management and financial planning. In this article, he brings forward his credible insights on subject of money management and allows us to uncover the top mistakes made by the millennial generation:
- Not keeping check on your credit score
Do you know your credit score? If not, you should find it out immediately. The most widely reported credit score is FICO. FICO scores range between 300 and 850. In general, scores between 670 -739 indicate “good” credit history.
It is a reflection of the degree of compliance you have had with the credit requested in the past. If you have historically been compliant in paying off your credit card debt, or your mortgage, or any other bill, your credit score should be high, which means that potential creditors will consider you more trustworthy.
If your credit score is low, they will think you less reliable, and you will probably pay more in the future for products such as insurance, car loans or mortgages.
The biggest challenge is that “good credit” takes time to build. You must show that you can use your credit card and pay your debt regularly. However, many young people of the millennial generation choose not to worry about their credit history until it is time to make larger purchases, such as buying a home.
This error is not usually due to a lack of concern, but rather due to a lack of understanding about the importance of building a good credit history. So take the time to read about credit scores and learn how to build a good record, because it could make things easier for you later on.
- Not saving up for retirement
A surprising number of millennials haven’t started saving for retirement either, waiting until the last minute that it may already be too late. Most people under the age of 30 haven’t even thought about retirement yet, let alone open a fund or pension plan to start saving money.
Retirement seems a long way off when we are young, but you need to start thinking about your goals as soon as possible. Start by asking your boss about the agreements with pension plans that you may have and the advantages that hiring them through your company offers. If your company does not have contracts, investigate the offers available in the market or start your savings account if necessary. The more money you can save now, the better.
Getting a job means new income, and millennials make up the largest proportion of workers entering the job market today. But like many first-time income earners, it seems that the thrill of having money can become a problem.
We finally have the means to improve our lifestyles and buy the products we’ve been dreaming of, but sometimes the excitement turns into overspending. Of course, in terms of our financial future, this habit is unsustainable.
To avoid overspending, try budgeting or learning a little about how commonplace businesses make you spend more money than you want to.
- Not analyzing financial decisions
That said, many millennials also have the means and the ability to make long-term purchases. You may consider buying a house instead of paying the monthly rent for an apartment, and this could cost you a lot in the long run financially. So, sit back and think about what products you want to “invest” in before you buy.
- Not investing soon enough
Investing money is undoubtedly the “most effective way to build wealth.” The younger you are when you learn to invest, the more time you give your money to grow. But many millennials have not even thought about investing, because it is “complex” or only difficult to learn. For that, we can only tell you that: we all have to start at some point, and starting young puts time on your side!
By reflecting on these common money management mistakes, you can make more informed decisions regarding your financial future. Of course, we know that it’s difficult always to make the right decisions, but only by trying different options will you discover which decisions work best for you.