MANILA -- Born from 1981 to 1996, millennials are currently between 37 to 22 years old.
They are saddled with stereotypes, both good and bad. Some of the labels they earned, while others are undeserved and I will leave you to figure out which is which. They have been called lazy, materialistic, and entitled. They are also known to be tech savvy, and prefer to pursue passions over building wealth.
When it comes to managing their money, studies show that millennials usually fail to take the big picture approach. Most prefer to live in the moment than plan for their future, and saving money just isn’t in their urgent agenda.
Of course, these surveys present generalizations, and conclude that millennials appear not to be as money-motivated as the generations that came before them. Instead, they are more interested in banking experiences than in banking money.
Outspoken as they are, there are millennials who have confessed to money mistakes they have made, and even turned them into another passion: blogging about personal finance to help others with actionable advice.
As we list the top 5 money problems of millennials, we also offer fixes to turnaround the situation, using the voices of the millennials too.
Money Mistake #1: Rack up debt. How to Fix: Use Apps to Track Spending.
Personal finance blogger and millennial Michelle Schroeder-Gardner of Making Sense of Cents spoke to Wallet Hacks and admitted one of the bad money moves she made was taking out more student loans than she needed.
You can’t really blame Gardner. When credit is conveniently available, it is tempting to access it, and then spend the money, again assuming that you are young and have time to pay it off.
Maybe for you it was splurging on your wedding. Or traveling with family and friends whenever seat sales open. Or upgrading to the latest smart phone every year, or gasp, every six months.
One quick fix to stop yourself from spending more than what you can afford to pay is to track your expenses. Attached as you are to your mobile phone, download an App or two and begin to follow your money. How much do you spend on what items, and then begin to question if you really need them. Having a mobile budget of sorts is not meant to restrict you, but aid you in discovering what you can buy now, and what you should postpone for later.
Money Mistake #2: Settling with underemployment. How to Fix: Stop looking for a job, build a career instead.
Stefanie O'Connell, author of The Broke and Beautiful Life, also pens a blog at StefanieOConnell.com. She has a drama degree and came to the Philippines at one time as a cast member of the international tour of Cinderella.
Talking to Wallet Hacks, she admitted: “My biggest mistake was waiting so long to realize my earning potential. I spent years doing jobs I hated – babysitting, working at restaurants, tradeshow hostessing – because I thought they were the only things I could do with my limited experience while still being a performer.”
Just having a job is not good enough. If you are underemployed, it can cause you to become a serial job-hopper as you keep looking for greener pastures. Worse, it also means you are underpaid – and that sets the stage for you to live from paycheck to paycheck, having little or no savings, not saving for retirement, the list of potential money issues are endless.
“I’ve since found that providing value or solving a problem is enough. You don’t have to have a specific degree, job title or level of experience to position yourself for better career and earnings prospects, you just need to take the reins and start doing,” Stefanie reveals.
Money Mistake #3: Setting Lifestyle Goals. How to Fix: Set Money Goals Instead
A random survey of millennials proved that every single one can share lifestyle goals – from living abroad to taking a gap year to having a destination wedding – but not the money goals to afford them.
Hannah Raudsepp of Weekdone.com blogged that millennials including herself are no less ambitious, just different, as many of them actually want to start their own business. “Our problem is that we don’t always know the How, When, and Why of our bold ventures. We sometimes get stuck chasing our tails in circles of might-be-opportunities and next-big-things.”
She adds: “And if we do set goals, they are unrealistic. Eighty one percent of 18 to 25 year-olds surveyed in a Pew Research Study said getting rich is their generation’s most important or second-most important life goal. 51 percent said the same thing about being famous, according to USA Today.”
Nothing wrong about wanting to be rich or famous, but you will need a plan to get there. Start with having SMART goals, or Specific, Measurable, Achievable, Relevant, and Time-Bound goals. Break down your lifestyle aspirations into peso terms. If you dream of a destination wedding, draft a detailed budget and see how far your money will stretch. If you are short, can you fill the gap? When you plot SMART money goals side by side your lifestyle goals, you are more likely to have a yay than a fail.
Money Mistake #4: Not Saving. How to Fix: Do it Now
Eva Baker of Teens Got Cents became interested in personal finance when she was 16, after she listened to The Total Money Makeover by Dave Ramsey, a successful money coach and author.
Her advice on the most important and urgent money move to make: save. “Learn to live on less than you make,” shares Eva to Wallet Hacks. “My biggest financial goal is to purchase a home and I'm working on saving for that now.”
Her advice on living below your means is one proven way to end up rich. If you can save 20 percent or more of your income, do it now. Consider moving your savings to online or better paying accounts for higher returns. Let the magic of compounded interest work for you by not touching your savings and the interest earned.
Retirement may be years away but it’s never too early to start. Or breathe life into your emergency fund so you always have a cushion in case you lose your job or decide to quit.
Look for ways you can save so you can pad your bank account. If there's free coffee in the office, take advantage and that can take care of your gourmet coffee shop stop. Big or small, all these add up.
Money Mistake #5: Not Investing. How to Fix: Start Now
Kyle Prevost did not have an ambitious goal when he set out to be a better money manager, as we can see from the title of his book, More Money for Beer and Textbooks. He runs a blog too with partner Justin Bouchard called Young and Thrifty.
He told Wallet Hacks: “Warren Buffett is said to have purchased his first stock at 11 – and regretted not starting before that! If I had understood the power of compounding investment returns at a younger age, I hope I would have made an effort to put a little bit away through my teens and college years.”
Saving is good, but investing is better as your money will enjoy higher returns. Before you invest, make sure to do your homework and choose products you understand and take on risks you can stomach. As millennials, you have years to ride out market volatility but no sense in getting ulcers during the journey because you did not know what you were getting into.
The best high from this roller coaster of mistakes and fixes is the promise of financial freedom that awaits you. Then you can retire when you want and live your best life.