Too many avocados to smush on toast. The latest iPhone. Nights out and meals in expensive restaurants. Fancy holidays. There’s no shortage of reasons and excuses for why millennials are having a tough time financially. Is it really their fault though, or is it just pure bad luck for coming of age during a period of economic instability? Here we look at a few mistakes that the millennial generation often make.
1) Living Beyond Their Means
Ok, so it isn’t just millennials that do this – people of every age group do this – but they are the first generation to really have the whole world at their fingertips and the freedom to spend money on what they want. Instead of making a coffee before they leave their house to go work, they grab one on the way in from an expensive coffee shop. They see those expensive shoes online or that holiday to Mexico and pay for it on a credit card, not thinking about how they are going to pay off the debt in the future. While using a card once in a while isn’t too bad, it can also spiral into unmanageable debt if not careful.
2) Not Budgeting
This ties in with the previous point. Budgeting is not taught in schools, and it is one of those skills that if someone hasn’t been shown, they won’t know what to do. It is essential to understand where money is going – is it being frittered away in coffee shops and bars, or is there genuinely a deficit when it comes to basic living costs? Sitting down at the beginning of the week or month and working how much money is needed for rent or mortgage, utility bills, transport, and other important things before knowing how much is left for everything else is vital for staying on top of finances.
3) Not building up a credit score
It’s quite often drummed into people that credit is bad, but that is not the case. It’s so important to build up a credit score, so if a mortgage is on the cards for the future, or a credit card is needed for a genuine emergency, it’s available. Even renting can be affected by a poor credit score. Millennials are living at home with parents for longer and longer while they save up for their first home, and so don’t have their names on any bills. This is an excellent way of building up a good credit score – as long as they are fully paid off every month.
4) Not having a pension
When they are young, and at work, it is difficult to think about the long-term and what will happen in retirement, especially when current living costs and inflation is so high, and wages don’t seem to be going up any time soon. In the UK, employers legally have to enroll full time, permanent workers into a workplace pension scheme, which many choose not to top up and some even opt out. For those that are self – employed or work on a freelance basis, it is entirely their responsibility to sort out a pension. While not having one might not make a big difference to them yet, it will in the future – and who knows what the state pension will be in thirty or forty years?
5) No savings
Many young people cannot afford to save, especially if they have a family to support. If they have a job which only pays minimum wage, or is an unstable zero hour contract, there might not be the funds available to stash away for a rainy day or emergency. However, when disaster strikes, as it so often does, there is no emergency fund to fall back on, which is when people turn to credit. Unplanned borrowing can become a massive burden if there is no spare money. Even putting a few pounds into a saving account if there is room in the budget to can make all the difference.
6) No insurance
There are so many different types of insurance out there that they are required to have that it is easy for them to overlook the ones that aren’t a legal requirement, but that is just important, such as income protection, critical illness, and life insurance. If circumstances change due to illness, a loss of job, or if someone dies, leaving behind a family, they can be assured that things will still get paid and their loved ones are protected financially.