Getting ahead financially is not easy, especially when you are doing things wrong. Personal finance enthusiast Graham Stephan has some insights into why many millennials have trouble building wealth.
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If you’re stuck in this rut, he has some tips to help you. Here’s a look at six financial mistakes Stephan says millennials keep making.
1. Live beyond your means
Millennials spend much more on convenience items than other generations. For example, eating out, delivery services, online shopping, and ride-sharing services fall into this category.
He said 75% of millennials are also guilty of competing with friends on clothes, cars, phones and other extras. In other words, trying to keep up with the Joneses is costing this generation a lot of money.
He noted the “Diderot effect” as a psychological side effect of this lifestyle. This happens when you buy something nice, it makes everything else you have seem less nice in comparison, prompting the need to upgrade.
2. Acquire substantial student loan debt
It’s no secret that many millennials leave college with significant student loan debt. From a financial standpoint, he said this sets them back decades, as the balance of their student loan debt is often difficult to pay off with a starting salary.
Therefore, he said it is important to think about what you want to do with your life before going to college.
3. Don’t negotiate
Almost everything is negotiable, he said. For example, when starting a career, she said salary, vacation, benefits, health insurance and working from home are all negotiable.
For other living expenses, he advised trying to negotiate costs such as the condition of the car you drive, the price of your rental apartment, a gym membership or a seat on a plane. She said asking for a discount in a polite and fun way can work more often than she thinks.
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4. Have a low credit score
The credit history you build in your late teens and early 20s will help you greatly in the future, he said. For example, his credit score is important if he wants to buy a house, a car, or apply for a business loan.
This will show potential lenders that you are a responsible borrower who has never missed a payment, and it’s incredibly easy, he said.
To build credit responsibly, he recommended opening a free card, meaning one with no annual fee, treating it like cash, spending normally, and paying the monthly balance in full. If you keep your balance paid in full, he said, you’ll receive the lowest interest rate when you want to buy a home or take advantage of your money.
5. Not keeping track of your finances
If you don’t know how much money is in your bank account, you can’t spend responsibly. He recommended signing up for free budgeting software, reviewing your expenses from the last 60 days and itemizing everything into two categories (non-negotiable expenses and discretionary expenses), cutting discretionary expenses and negotiating mandatory expenses.
He said you can save a few hundred dollars a month without even realizing it if you follow these steps.
6. Not contributing to your retirement fund
Time is one of the biggest advantages when saving for retirement, he said.
If you invest $100 a month starting at age 20 and receive an 8% return, by the time you’re 65, you’ll have $540,000 invested, he said. However, if you wait five years to start saving, you’ll only have $337,000 by the time you’re 65.
Ultimately, he said the money you save and invest in your 20s will be the most important throughout your life. This is due to the interest you will be able to earn if you allow it so much time to grow.
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This article originally appeared on GOBankingRates.com: Graham Stephan Says These 6 Financial Mistakes Are Keeping Millennials Poor
