When it comes to millennials and money, there’s good news and bad news.
Good news: The 75 million millennials born between 1981 and 1997 are collectively set to inherit over $30 trillion in wealth from their parents.
Bad News: Those that will treated their mothers well and will actually inherit something, probably won’t get it until later in life (after their own kids have run them ragged), so they still need to focus on their own financial situation TODAY.
In general, how are millennials doing with money?
They definitely have some work to do. According to a recent survey by the National Endowment for Financial Education that tested their financial knowledge, only 7% scored very well on the test, and less than 25% could demonstrate basic financial literacy.
Wow, those numbers are very low, what are the most common mistakes that millennials make when it comes to money?
Well, contrary to what some people think, it’s actually OK that they buy avocado toast from time to time. That’s not what’s hurting their finances the most.
In my experience, there are three major mistakes that I think millennials should avoid in order to ensure they have a bright financial future. And they are…
1) Not setting specific financial goals
If you ask the average millennial how much they need to save for retirement, you’ll likely get a blank stare in return. Now, that’s in part because most millennials think more about the lifestyle they want to live prior to the traditional retirement age.
However, the biggest reason that they don’t know how much they need is because they’ve never sat down to actually calculate the number.
This is particularly problematic because, how can you achieve a goal, if you have no idea what the goal is?
2) Not paying back student loans aggressively enough
Many millennials graduated college with a mountain of student debt on their backs. This has caused them to delay lots of major life decision like buying a home, starting a business or even getting married.
But, from what I’ve seen, many of them haven’t gotten serious enough about paying their loans back aggressively.
Many of them have chosen to defer their loans, or have even gone back to school to avoid paying their loans right away, both of which only serves to get them deeper in debt.
3) Investing to conservatively
Many millennials suffer from what I call PFCD (Post Financial Crisis Disorder). They came of age during the worst financial crisis that will likely (hopefully?) see during our lifetimes.
That experience has truly shaken their confidence in the financial markets and has led them to a general lack of trust of the financial industry.
Because of this, nearly 2/3 of millennials feel more comfortable with their money in a savings account than in some sort of investment.
While this may help them sleep a little better at night in the short-term, that strategy isn’t going to help them grow their money over time.
So what steps do you think they should take?
1) Write down your financial goals
You’re 42% more likely to achieve a goal if you write it down. Calculate how much you think you’ll need or want in the future, and write it down.
That’s the only way you can start putting a plan together to get there.
2) Get aggressive with your loans
Don’t feel like you have to stick with a dead-end, low paying job just because you might have chosen the wrong major. Consider than decision water under the bridge.
Take control of your financial life by searching for a better job, freelancing, or working a (legal) side business in the evenings and weekends.
Sacrifice a little time and effort today to open up your options for the future.
3) Get comfortable taking a little risk
It’s certainly understandable that millennials are afraid the invest their hard earned money, yet they’ve largely missed out on an almost 10 year bull market in stocks.
I’d suggest they spend time getting more knowledgeable about investing, or talk with someone that can help them, so that they’re not leaving money on the table.
For millennials and others in the audience interested in a detailed training on how to improve their financial situation, there’s still time to register for my free, live webinar on Wednesday, August 1st at 8pm Eastern called:
Serious About Wealth: 5 Ways To Fix Your Finances This Week
Interested listeners can register for free at http://www.robwilson.tv/fixyourfinances
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