The best personal-finance tips for millenials should save you from making the biggest mistakes with your money. You know, the ones that you’ll have to pay for in many years to come. With that idea in mind, here are tips from the experts about some of the most common and worst financial mistakes that millennials like us make every day:
1. Trying to pay off your student loans before contributing part of your paycheck to a 401(k) or HSA account.
You’ll get so much more free money in the long run by letting your long-term savings start growing now. Financial writers at Forbes advise:
if you have an employer match in your 401(k) and/or HSA, you should contribute enough from day one to get the full match.
2. Relying on credit cards.
Newsweek wrote an excellent story about how credit-card companies these days prey on millennials and their lack of understanding about how much interest they really pay on purchases. Many banks and credit institutions won’t tell what your APR is on purchases until after you sign up for their card, and recently the rates have skyrocketed to a range of 15 to 20 percent — the highest rate in years. If you can’t pay off your balance within a month, then just don’t buy it with your credit card.
3. Spend too much on housing or renting fees.
Everyone wants a comfortable, beautiful place to live in, but it’s not worth it if your rent is consuming the majority of your paycheck. A good rule of thumb is to never live somewhere with rent that costs more than half of what you make in a month.
4. Buying a new car
Sure, everyone wants a sweet ride. Once you get a good job, it’s tempting to walk into your favorite car dealership and see what they can offer you. While you may be able to afford loans to get a new car, the dealership is laughing at you for doing it. Here’s why:
As soon as you leave the lot with a brand-new car, the value of your car has just dropped by thousands of dollars in resale value. Financial advisers estimate that:
New cars lose about 20 percent of their value as soon as you take ownership.
Not to mention the increased insurance coverage you’ll need on a new vehicle.