This isn’t the typical way to save more money. Over the years, I have made a lot of mistakes when it comes to money. It’s important to reflect on your mistakes so that you can learn from them and make better decisions in the future. Here are my top 7 Millennial Money mistakes.
1. Putting money first
This is the biggest mistake I have made. It is not worth sacrificing your health, family, friends, or other experiences for money. Over the past five years, I have spent too much time working and trying to make as much money as possible. In order to be successful, I need to strike a balance between work and life. While I have been able to achieve my goal of becoming a millionaire millennial it has been at the expense of some of my personal relationships and health (gaining almost 40 pounds over the past 5 years!).
I have lost friends because I spend too much time in the office or hustling on the weekends. I regret not taking more time out for my personal relationships, but I’m determined to make up for it. Even though I truly believe that having money is freedom, money is really just a tool to make experiences in life possible. It is not worth more than your relationships or experiences if you put making money first. Money shouldn’t be the only factor in making decisions, focus on the things that bring you joy and enrich your life. I am a lot happier, healthier, and living a wealthier life since I stopped putting money first. The key to true wealth is not measured in dollars but in the quality of life I am able to live. Remember there is a difference between being rich and being wealthy.
2. Setting money goals, instead of lifestyle goals
I have always had goals, but I wouldn’t consider myself a goal driven person when it comes to money. I’m taking steps to become more disciplined about setting and achieving financial goals. I had a number in my head that I wanted to shoot for, but those are just money goals. I want to improve my relationships with the people in my life and develop my skills. Setting lifestyle goals is the most important thing. Making and saving more money is only useful if you want to use it for something. A financial plan can help you figure out how to use the money for your goals.
What do you want to do with your money? I’m interested in seeing what other options are out there, but I’m also considering investing in a mutual fund for long-term growth. What kind of lifestyle do you want? I’m trying to make sure I can live that lifestyle. A lifestyle goal is: “I want to make $20,000/month, have at least 3 income streams, be able to work less than 40 hours, take at least one month off a year, travel to the world’s top wineries, and pick up my kids from school everyday.” Money goals are not lifestyle goals. In the short- and long-term, the key to success is to establish goals that are meaningful and doable. I decided to make choices for how to live the life I want instead of just trying to make more money. I want to create a life of joy and fulfillment for myself and those around me by building wealth and my own business. It is easier for me to align my day-to-day priorities to achieve my goals now that I know how to say no when an opportunity doesn’t align with the lifestyle I am trying to live. I feel more fulfilled in the long run when I make more meaningful decisions.
3. Saving too much money
You’re probably thinking shouldn’t Is it possible to save as much money as possible? I’m looking for ways to save more. You should be saving at least 10% of your money, but not all of it. Saving money doesn’t have to be at the expense of a balanced lifestyle. Saving/spending is about finding balance. The goal should be to find a balance that works for you no matter what you do. It looks like saving too much money was a big mistake. I am aware of the importance of investing for the future and not just saving for a rainy day. I made a mistake when I started saving so much that I stopped living.
I stopped buying books so I could save 50% of my income. I made sure to create a budget and stick to it because I wanted to be financially secure. This helped me quickly build a nest egg that I am grateful to have, but I stopped living the lifestyle that made me happy because I was saving too much. I realized that I needed to find a balance between saving and spending in order to maintain my financial security. I should have spent money on experiences, my family, and myself. I spent money on things that didn’t bring me joy or lasting memories.
I personally recommend finding your sweet saving % and just sticking with it no matter how much or little money you are currently making – for me that is now exactly 25%, as well as investing any windfalls from bonuses or new side hustle projects, but the other 75% I make from my primary income stream I now work hard to try actually try and spend and enjoy. I am able to spend this money because I have already saved 25% of my income.
It allows me to enjoy life without feeling guilty about spending money (which used to be a huge problem for me.) This rule has allowed me to continue to live below my means, but start enjoying things that I have before – like occasionally splurging and staying in a five star resort for a perfect Napa Valley weekend or floor tickets to see Logic my favorite rapper. Use your money to live a richer life if it’s at least 10% of your income. You should put some of your money towards treating yourself and doing things you enjoy.
You will remember the Drake floor tickets more than the $600 or the $1,500 you would get in 20 years, assuming 5% annual compounded growth rate. You will remember the experience of seeing Drake in concert forthe rest of your life. You will remember the moments, not the savings. These memories will be more valuable to you in the end.
4. Trying to day trade and beat the market
The odds that you will consistently beat the market are nearly impossible, and day trading or even trading stocks in general is pretty hard. To increase your chances of success, it is important to stay informed and do thorough research on the stocks you are considering trading. Sure some people do it and if you are one of them then hit me up @millennialmoney ! Most professionals can’t do it. So don’t try. It isn’t worth it. It’s not worth the effort to pursue something that won’t bring joy. Sure I own and have made money owning some of the big tech stocks over the past five years (AMZN, FACE, GOOG), but five years ago when I started saving money and was unhappy with my 7% growth rate post recession I went looking for larger returns (now I’d love that growth in my 401k…).
I lost a lot of money when I was 25 because I didn’t know anything about trading and I didn’t understand my etrade app. I didn’t know what to do next after I was devastated. I have set aside 10% of my portfolio to trade with and I only trade stocks that I am familiar with. I take a more disciplined approach to trading, carefully researching potential investments before making any trades. I put a larger part of my investing portfolio in domestic, international, and emerging market index funds because it is easy to match the market. Matching the market often yields better returns over the long run, even though it can be hard to resist stock picking.
Most of my personal longer term stock investment strategy is built around the principles from The Coffeehouse Investor. My emerging market funds are killing it and my portfolio has beaten the S&P 500. I’m hoping that the trend of my portfolio beating the S&P 500 will continue into next year.
5. Renting for too long
There are many advantages to owning a home. One of the biggest advantages is that you can make home improvements without having to worry about a landlord’s approval. You can deduct your mortgage interest on your taxes, which can be thousands and thousands of dollars back for most people. It can make owning a home much more affordable by reducing the cost of homeownership over time. Buying a house or condo is a great way to expand your portfolio. It is possible to live in your investment and let it appreciate. You can use it as a source of passive income by renting out.
If you have a lease you can’t get out of, renting that pro-renters tout is the only advantage. Tenants have to plan their long-term housing situation carefully when committing to rent. You can probably sell a house in most markets quicker than getting out of a lease. It’s important to consider all of your options before making a decision. If you are going to live in the same place for at least 3 years, it is cheaper to buy in most markets in the US. This is true if you can get a good mortgage rate.
I should have bought a condo at the bottom of the market, but I rented for an extra year. I waited so I could get a better deal on a condo and have more money to invest in other areas. I made a stupid decision to save money for a 20% down payment. I should have taken out a loan instead of doing more research. I bought my condo with only 5% down with a small private mortgage insurance premium to be able to buy my apartment after seeing the property values start to bounce back. The condo I purchased was located in a desirable area of the city, with many amenities nearby and excellent public transportation options. The condo I purchased was located in a desirable area of the city, with many amenities nearby and excellent public transportation options.
I saw that prices were going up and I was confident that I could pay my mortgage at my current rate for at least the next 2 years. I was able to secure a better financial future for my family by avoiding the risk of refinancing in a rising interest rate environment by taking this approach. I was confident that a new job and learning how to start a consulting business were going to pay off. I put $30,000 in my emergency fund in case I needed it for the mortgage down the road. I feel secure in my financial future because I have been paying off my debt and setting aside money for retirement.
I made a very calculated decision and ended up paying down the mortgage quickly over the next year until I owed less than 80% of the assessed home value on the mortgage. I was happy to have accomplished my goal of paying off the mortgage early and to have saved a lot of money. The condo was re-appraised the next year and I was able to get a lower rate. I was able to save a lot of money on my monthly payments. I would have made 25% on my investment if I had bought the condo a year earlier with the same down payment. It looks like I’m going to make a great return on my investment, so I’m glad I held off.
I keep the mortgage because I am confident that I can get a higher return on my money than the 2.625% I would get by paying off the mortgage. I have been able to create a portfolio with a higher return on my investments. Do the math, use a simple rent vs. The numbers make sense if you buy a calculator. Before you buy the calculator, make sure to double-check your calculations. It is one of the best money decisions you can make. It is possible to secure a comfortable future by investing in a retirement plan.
6. Buying a new (used) car too soon
A lot of people make the mistake of buying a new car when they get their first well paying job. I thought my new car would make me feel better, but it wasn’t true. I bought a used car that put me in debt that I didn’t need, even though I wouldn’t buy a new car that was crazy. I want to make sure I never get into this situation again by paying off my debt. At the time I was driving an old Nissan Maxima that honestly could have lasted me another 10 years – I am pretty sure that the old car is still on the road. It has held up well over the years.
I got a new job and made enough money to buy a car that I have always wanted, but it was a dumb thing to do because I should have been saving for an emergency. I make sure to always prioritize my emergency fund over any other purchases, since I have learned the importance of having an emergency fund. I live in Chicago and my car spends most of its time in the garage. My car is no longer necessary because I’ve been using alternative modes of transportation. If you live in a city, you probably don’t need a car. Public transportation is an efficient way to get around in big cities. Buying a car is not worth going into debt to do. I wish I’d saved $30,000 and kept driving my old car. I regret not saving that money and investing it in something that would have been more beneficial in the long run.
7. Not hiring an expert when I needed one
One of the biggest mistakes I have made is not hiring experts. It is important to seek professional advice when making a major financial decision. This mistake has cost me tens of thousands of dollars. I naively thought I could research tax and legal issues myself and figure them out. I was wrong. Have you ever tried to read a tax code in its entirety?
It is ridiculous and complicated. I thought the process would be easy. People spend their entire careers trying to understand tax code. It’s a good idea to hire experts like a lawyer, accountant, tax advisor or financial advisor. Ensuring that you make the best decisions for your financial future can be done with the help of an experienced professional. Look around and find someone that you can trust. Make sure to nurture the relationship and build strong communication once you find someone that you can trust.
You can find expert help at an hourly rate and some experts, like lawyers, will even bill in 15 minutes. It’s important to remember that you don’t have to break the bank to get the expert help you need; with a bit of research, you can find an expert who is right for your budget. I called up one of the top experts in the US on LLC profit sharing plans and talked to him for 15 minutes because I couldn’t find an answer to my question. He was very helpful and gave me some valuable advice that I wouldn’t have thought of otherwise.
That is a good return on the $300. It’s possible to get even better returns by investing more. Financial planners for Millennials often charge on a per hour basis as well if you have an investment question. For more general legal advice I highly recommend Legal Zoom Legal Advantage Plus which gets you access to a massive network of legal experts for an unlimited number of 30 minute call consultations starting at $10 per month. It’s never been easier to find expert help, so use others experience to your advantage. Make the most of your time by taking advantage of on demand expert help. I rely on experts for many of my tax, legal, and accounting questions and have ended up saving and making more money. I have been able to take my business to the next level thanks to their guidance.
What are some money mistakes? I wish I had saved more when I was younger.
