The millennial experience with the 2008 financial crisis may have given them a perspective towards their financial lives that can be detrimental to achieving any long-term aspirations they might have.
This distorted view may have led many to make any number of the following mistakes:
- Waiting to invest – time is the biggest advantage millennials have to secure a strong financial future. The power of compounding, coupled with decades of investing, can achieve miraculous things.
- Upgrading lifestyle before increasing savings – as your income grows, there is certainly nothing wrong with enjoying yourself, but a good habit to get into is to put aside a partial amount of that increase in savings or investments.
- Not taking risks – time gives investors a distinct advantage, but it also diminishes their purchasing power down the road. It’s important to outpace inflation, which averages 2%-3% historically, by taking risks with your investments.
- Neglecting retirement savings for student loans – even if all you contribute is the minimum matching percentage to a 401(k) and focus your remaining cash flow on paying off student debt, you're still getting a head start on building long-term wealth.
- Lack of planning – whether a goal is personal, professional or financial, if you want to achieve something, there needs to be a plan in place to do so.
This article elaborates on these issues and provides helpful suggestions on avoiding them.