Ever kick yourself for not planning ahead financially or for making purchases you later regretted?
You’re not alone.
It’s easy to make a few missteps when you’re first starting out and still learning how to stick to a budget.
Although there are a few things other generations can learn from Millennials, here’s a look at four all-too-common money mistakes Millennials make, along with tips on what to do instead.
Mistake #1: Forgoing health insurance
The Affordable Care Act (ACA) has expanded access to health insurance for those who may not have employer-sponsored plans.
However, a 2014 survey (by Princeton Survey Research Associates International) found that roughly one in four adults aged 18 to 29 do not have health insurance, twice the rate of all other adults.
Uninsured Americans may face penalties come tax time, but more importantly, a single accident or illness could cost them tens of thousands of dollars in out-of-pocket medical costs.
That’s a gamble most people can’t afford to take.
If you’re under 26, you might qualify for coverage under your parents’ insurance, even if you’ve graduated from college and are living on your own.
If you’re 26 or older, shop around for insurance through the federal or state healthcare exchanges.
Mistake #2: Saving money as cash
A recent Bankrate survey found that more than one-third of Millennials prefer to keep money they don’t need for at least 10 years as cash.
That approach may seem safer than facing the potential ups and downs of investing. But with interest rates below 1%, money kept as cash loses its spending power to inflation.
Meanwhile, the S&P has gained 17% over the past year.
If you expect to need the money within five years, experts generally advise you to keep the money in cash-like vehicles such as short-term CDs or money market funds.
But if you have a longer time horizon, consider investing the money in the hopes of outpacing inflation.
Mistake #3: Relying on credit
Recent grads should be building a credit history so they can eventually qualify for a mortgage and preferred insurance rates.
But if they over-utilize credit cards, they can lower their score and spend extra money on interest.
Experian’s 2013 credit study found that Millennials tied with Gen Xers for the highest credit utilization rate of any other age group: 37%.
However, while Gen X had an average credit score of 653, the average score for Millennials was over 20 points lower.
Renting an apartment and buying a professional wardrobe after graduation isn’t cheap, but recent grads who maintain some of their frugal college habits (like living with roommates and eating on the cheap) can help them avoid the temptation to charge up a storm.
Mistake #4: Postponing retirement savings
Workers under age 35 have the lowest 401(k) participation rate of any age group, reports the Center for Retirement Research at Boston College.
That’s a huge lost opportunity!
Millennials who have a free company match and don’t take advantage of it are essentially missing out on free retirement money. Saving early means cashing in on the benefits of compound interest over time.
What money mistakes have you made and what would you do differently?