Millennial Money Mistakes (Part 2)
In case you missed part one and the introduction to Millennial Money Mistakes, you can find that blog post here. This post lists common mistakes 6 through 10 and some tips to avoid them or implement them.
Millennial Money Mistake #6 – Buying a New Car
Sorry folks, a car is not an investment. The goal of an investment is to appreciate in value, when was the last time you saw a new car appreciate in value? In most instances, they depreciate the second you drive it off the lot. Add to the fact you’re probably tackling student loans, do you really want that much more debt over your head?
Consider purchasing a slightly used vehicle as your next purchase. Why? It’ll save you thousands of dollars off the ticket price and most still come with a 2-3 year warranty (which is why most people buy a new car anyway). What’s not to love about that?
Millennial Money Mistake #7 – Not Setting Money Goals
At what age did you start working? And how much money have you been able to save in that time? Do you want that next period of time to have the same result? Maybe, maybe not. But you probably want to do better. We all want to do better.
One of the reasons people don’t save money effectively is because they don’t have a future goal in mind to aim for. How much income do you want to earn this year? How much do you have to save for your next really cool vacation? Do you want to have less debt?
Take a moment to reflect where are now financially and where you want to be in the future. (A good start is creating a net worth statement, contact us if you don’t know how to do one) Set three money goals that you want to establish in the next 1, 3, or 5 years.
Millennial Money Mistake #8 – Not Tracking Your Net Worth
How do you know you’re heading in the right financial direction? By tracking your net worth. This only takes a few minutes to put together, and just a few minutes each year to update. In the first column, list and add up all your assets. This includes your house, your bank account balance, investments (RRSP, TFSA, RESP), and any other savings accounts. We rarely include your vehicle as an asset, unless you plan on selling it and not acquiring another in the future.
In the 2nd column, list and add up all your liabilities. Credit card debt, mortgage, car loan, student debt, etc. We like to list the interest rate on each debt as well because it helps prioritize which should be paid back first.
Finally, subtract your liabilities from your assets and what you’re left with is your net worth. Hopefully it’s positive. If it isn’t, that should be a financial goal heading forward.
Millennial Money Mistake #9 – Not taking full advantage of your company matching pension
For the lucky ones that have a company matching pension (some Millennials would just like a job...) it makes sense to take advantage of that option! Where else can you save $100 and make 100% return (from the company matching your deposit)? The correct answer is nowhere but a company matching pension!
If you are confused about your pension or wondering if your company offers one - give us a call and we'll help you figure it out!
Millennial Money Mistake #10 – Keeping Up With the Jones’ (or Your Social Circle)
This probably should have been listed as #1, but having it as the last in the series hopefully leaves a similar impact. Studies have shown we become the average of the 5 people we spend the most time with, but if those 5 people make significantly more money than you or have goals that don't align with yours you may find a clash in spending habits.
For example, if you are saving for a house down payment, but none of your friends are, you may have to forego that movie out or the all you can eat buffet or you'll find saving some dollars very difficult.
We all have different goals. We all have different spending habits. Don't feel the need to keep up.
Just like any other generation, we as Millennials face daily struggles on deciding where our hard earned dollars should be spent or saved. The key to success is having goals to work towards, a plan to follow, and a way to track your progress. Once these three steps have been implemented, you'll be headed down the road to success and will likely be able to avoid the listed 10 Millennial Money Mistakes!