The millennial generation has a pretty wide age range.
Born between 1980 and 2000, millennials are currently between 36 and 16 years old.
The age range also fees larger because the current age range of millennials are the years in life when a lot can happen.
Sixteen year old millennials are still attending high school, getting their first jobs, buying their first cars, and preparing to go to college or face “the real world” in a just a couple short years.
Those at the other end of the millennial spectrum are nearing the age when they may face major life decisions as they search for their identity and the meaning behind their lives outside of their career or family roles.
Then there are those in between who are graduating college, finding their first career jobs, getting married, buying a house, and contemplating starting families.
With all these life decisions and milestones happening within one generational group, it can be hard to define exactly what a millennial is. However, one thing that most experts agree on is that millennials as a whole are not exactly wise with their money.
Here are 6 of the most common millennial money problems.
1. Racking Up Debt
As I mentioned, the millennial age range includes a lot of life changes, which can be very expensive and often mean taking on debt. Student loans, weddings, buying a house, and buying a car can all mean racking up debt, and all of these things tend to happen in just a few short years.
Unfortunately, many millennials are not put off by taking on debt for these life events and purchases. Some of them are assumed to be “good debt”, while others are just seen as a normal progression of life.
Millennials also tend to assume that because they are young, they will have plenty of time to pay off their debt and build savings later in life. But what they don’t realize is what they are giving up by delaying their savings as they rack up and then (hopefully) pay off their debt.
2. Living Paycheck to Paycheck
Living paycheck to paycheck is a nasty habit that many millennials have fallen into. There are many reasons why millennials may be living like this.
One reason might be because they took on too much debt (as I already mentioned), but another reason could be that many millennials are unemployed or underemployed. They may not be making enough money to get ahead financially with their current rate of spending.
The worst part is that many millennials will continue to live paycheck to paycheck until something drastic happens that puts them worse off financially and they learn their lesson.
3. Have Little or No Emergency Savings
Not only are most millennials living paycheck to paycheck, they also tend to have very little, if any, emergency savings. When that drastic event happens that causes them financial distress, millennials will likely have to put some of their expenses on credit cards in order to get by, causing them to go even further into debt.
The hope is that one emergency of this type will teach them the importance of emergency savings so they can re-work their budget and find a way to start putting some money toward savings for future unexpected events.
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4. Putting off Retirement Planning
I get it, it feels like retirement is ages and ages away when you are young and just entering your first career job, but time will fly by in the blink of an eye if you aren’t careful.
Plus, if you don’t save for retirement from your first paycheck, you’ll get used to netting more money in your paycheck. It’ll be that much harder to take a pay cut to save money for retirement later on. It’s best to start saving for retirement from your first paycheck so you get used to a lower take-home pay from day 1. You’ll start compounding interest that much sooner, too.
5. Being Un-Insured or Under-Insured
Paying for insurance has got to be the most boring expense in my budget each month. It’s not exciting to pay for insurance and it can be tempting to lower your coverage or cancel insurance altogether to save money.
After all, we all have insurance with the hopes that we’ll never have to use it, so why should we keep paying for it? Because you never know what can happen in life. This is why you need an emergency fund and insurance to make sure you and your family are taken care of.
It’s also important to get some coverage in place right away while you are young and healthy. Premiums will do nothing but increase as you get older and face more health concerns. Plus, you might not even be able to get insurance if you wait and end up with some medical conditions.
6. Ignoring Credit Score
Some of the millennial money problems mentioned earlier, specifically the one about racking up debt, not only makes it harder to save money, but it can also wreck your credit score if you aren’t careful. Your credit score may not seem that important, but if you are planning to buy a house, a car, or another major purchase with a loan, you’ll wish you’d paid more attention to your credit score.
A low credit score can result in a higher interest rate, which can cost you thousands of extra dollars over the life of a house or car loan. Or it can even result in you being denied credit if your score is low enough.
A low credit score can also happen due to insufficient credit history. Some millennials have avoided taking out credit cards and other forms of debt. This is great in theory as you won’t be tempted to rack up debt, but not having a credit history can also result in being denied a loan when you get ready to make a major purchase.
These are just some of the most common millennial money problems faced by our generation.
Do you face any of these problems? Do you think they’re exclusive to millennials? What other common money problems do millennials face?