4 Millennials Share Their Biggest Financial Mistake And How They Turned It Around
It’s inevitable that we all mistakes, especially when it comes to money. We sign up for credit cards that put us into debt, or unknowingly let student loan debt balloon to a point where we feel like we’ll only be able to pay it off when we’re old and grey.
As rough as it is to get knocked down financially, money mistakes can be a stepping stone for financial success. If you want to build better financial habits, the best way to learn is by doing. According to a Northwestern Mutual 2018 Planning and Progress Study, 87% of Americans agree that nothing makes them happier or more confident than feeling like their finances are in order.
Fear of making a financial mistake shouldn’t keep you from taking action. A great way to take steps forward is to learn from those who have already made a faux pas in the past.
Four millennials share their biggest money mistake (myself included) and how they were ultimately able to turn the situation around, coming out on the other end far more financially savvy.
Student loan debt led to better money management
When I was frolicking on campus during my college years, I had no idea how much my student loan debt would impact me after graduation. I made the mistake of not understanding the loan terms early on. Most of the loans were unsubsidized, which meant interest accrued on the loan as soon as it was disbursed to my account.
Shame, because I could have kept the debt at bay by making payments to at least cover the interest while I was in school. Better yet, I would have looked more eagerly for scholarships or grants to cover the cost of tuition.
The student loan debt forced me to take a look at my finances for the very first time as an adult.
The student loan debt forced me to take a look at my finances for the very first time as an adult. And because of it, I was able to ask myself some hard questions about my life. What did I want for myself financially? What were the life goals that I needed money for in order to achieve them? I used those goals as motivation to pay off all of my student loan debt in two years and five months. The mistake of not paying attention to my student loans actually helped me become a better manager of money as an adult.
Missed 401(k) match helped to max out retirement
Jenny Swanson, a 39-year-old from St. Louis, Missouri, made the mistake of not investing in her company’s 401(k). “I didn’t invest up to my employer’s match for five years because it seemed too complicated,” Swanson admitted.
Many companies offer an employer match which means if you don’t take advantage of your 401(k), you could be losing out on free money.
Many companies offer an employer match which means if you don’t take advantage of your 401(k), you could be losing out on free money. At the minimum, you should contribute to your 401(k) up to the employer match. So if your employer matches up to 5%, contribute up to that amount.
If your 401(k) plan offers free assistance with a financial advisor it might be wise to set up a meeting. Swanson got in touch with her financial advisor and contributes the maximum amount to her 401(k) now—for 2019, the contribution max is $19,000. Even talking with human resources could help you figure out complicated plans so you can contribute to your retirement effectively.
A real fire lit a metaphorical fire for renters insurance
I had gone without renters insurance for a few months and then this freak incident happened.
Ever skipped out on renters insurance to save money? Karen Elaine, a 24-year-old from Danville, Virginia, didn’t have renters insurance when her apartment building caught on fire. “I had gone without renters insurance for a few months and then this freak incident happened. It forced me to look into insurance coverage,” she shared.
According to the Insurance Information Institute, only 41% of renters have renters insurance. This kind of insurance can cover potential damages like fires, theft or vandalism. It can also be bundled with other policies, like auto insurance, which can help you save money in most cases.
“I ended up purchasing renters insurance for $18 per month that covers up to $30,000 in damages to my belongings,” Elaine shared. The national average is $17 per month, so the small premium cost is worth it to protect your belongings.
Overspending led to better budget control
In a study by Endoca and SWNS/72 Point, one-third of millennials claim their lives are more stressful than the average person. And overspending can be a big factor in causing unnecessary stress. In fact, 62% of Americans report they feel stressed over their finances.
Lauren Lane, a 30-year-old from Colorado Springs, Colorado, found that overspending led to stress initially, but then it led to better money management. “At one point, I had $16,000 in credit card debt. I knew something had to change, so I started to track my spending for the very first time using a budget,” said Lauren.
Once I figured out, okay, I can either take this money to buy more crap on Amazon or use it to pay down debt, it was easy to make better choices with my money.
She was able to gain control of her spending by writing down how much she spent on certain things and made choices to help her get out of debt. “Once I figured out, okay, I can either take this money to buy more crap on Amazon or use it to pay down debt, it was easy to make better choices with my money,” Lane admitted.
Before your spending gets out of control, rein in your finances with a written budget. Whether it’s a spreadsheet, money-tracking app, or sheet of paper, a budget can prevent you from overspending and help you pay down debt.
It’s up to you to overcome challenges as you face them. Rather than opt out of handling your finances (which is a bad idea) take this as a learning opportunity to become more financially savvy.
Justine Nelson is the founder of Debt Free Millennials, an online community to help millennials get out of debt. Justine enjoys writing and speaking about all things personal finance. This Midwest millennial paid off $35k in student loan debt and now resides in San Diego with her husband living the DINK life (Dual Income, No Kids).
Feature Image: The Money Manual