Yahoo Finance Graham Stephan Says These 6 Money Mistakes Keep Millennials Poor
Getting ahead financially isn’t easy — especially when you’re doing the wrong things. Personal finance enthusiast Graham Stephan has some thoughts on why many millennials are having trouble building wealth.
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If you’re stuck in this rut, he has some advice to help. Here’s a look at six money mistakes Stephan says millennials keep making.
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1. Living Above Your Means
Millennials spend a lot more on convenience items than other generations. For example, food away from home, delivery services, online shopping and rideshare services fall into this category.
He said 75% of millennials are also guilty of competing with friends on clothing, cars, phones and other extras. In other words, trying to keep up with the Joneses costs this generation a lot of money.
He noted “the Diderot Effect” as a psychological side effect of this lifestyle. This happens when you buy one nice thing, it makes everything else you own seem less nice in comparison, causing the need to upgrade.
2. Acquiring Substantial Student Loan Debt
It’s not a secret that many millennials are coming out of college with significant student loan debt. From a financial standpoint, he said this sets them back decades, as the balance of their student loan debt is often hard to pay down on a starting salary.
Therefore, he said it’s important to think about what you want to do with your life before going to college.
3. Failing to Negotiate
Almost everything is negotiable, he said. For example, when starting a career he said salary, vacations, benefits, health insurance and work from home are all negotiable.
For other life expenses, he advised trying to negotiate costs like the terms of the car you drive, the price of your rental apartment, gym membership or seat on an airplane. He said asking for a discount politely and funnily may work more often than you think.
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4. Having a Low Credit Score
The credit history you build in your late teens and early 20s will help you tremendously in the future, he said. For example, your credit score is important if you want to buy a house, car or take out a business loan.
This will show prospective lenders that you’re a responsible borrower who has never missed a payment, and it’s incredibly easy, he said.
To build credit responsibly, he recommended opening a free card — i.e., one with no annual fee — treat it like cash, spend normally and pay the monthly balance off in full. If you keep your balance completely paid off, he said you’ll receive the lowest interest rate when you want to buy a house or leverage your money.
5. Not Keeping Track of Your Finances
If you don’t know how much money is in your bank account, you can’t spend responsibly. He recommended signing up for free budgeting software, reviewing your spending from the past 60 days and itemizing everything into two categories — non-negotiable spending and discretionary spending — cutting back on discretionary spending and negotiating mandatory spending.
He said you can save a few hundred dollars a month without even realizing it if you take these steps.
6. Failing to Contribute to Your Retirement Fund
Time is one of your biggest advantages when saving for retirement, he said.
If you invest $100 per month starting at the age of 20 and receive an 8% return, by the time you’re 65 years old, you’ll have $540,000 invested, he said. However, if you wait five years to start saving, you’ll only have $337,000 by age 65.
Ultimately, he said the money you save and invest in your 20s will be the most important throughout your life. This is due to the interest you’ll be able to earn by allowing it so much time to grow.
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This article originally appeared on GOBankingRates.com: Graham Stephan Says These 6 Money Mistakes Keep Millennials Poor
