By making the right choices, the millennial generation (the generation born between the early 1980s and the early 2000s) can better shake off the effects of a slow-to-recover economy and set themselves up for financial success through better budget planning.
If you or a millennial that you know is struggling with budget planning, then it's not too late to get back on the straight and narrow by avoiding these three financial faux pas.
1. Using credit cards incorrectly
According to a survey conducted by Bankrate.com, not only is this generation's usage of credit higher than that of other generations, they're using credit cards all wrong. For example, the survey indicated that only 40 percent of millennials pay their credit card balances in full each month (compared with 53 percent of the over-30 age group). To compound the situation, three percent admit to missing credit card payments.
When used correctly, credit cards can help you establish and build your credit history. They can also be a good way to earn discounts and cash-back rewards. However, it's always best to use credit sparingly and try you pay your credit card purchases off at the end of every month.
2. Not saving enough for retirement
Millennials aren't saving for retirement as they should. In fact, only 46 percent of respondents from Money Under 30's 2015 Millennial Money Survey contribute money to a retirement account such as a 401(k) or IRA, down from 49 percent in 2014.
If you're lucky enough to have an employer-sponsored retirement savings plan, take advantage of it — especially if you have any type of matching or employer contribution. Yes, it means you'll be taking home a little less, but because your contributions are made with pre-taxed dollars, you're actually reducing your taxable income by deferring earnings and taxes until you're ready to make a withdrawal. If you want to see how your retirement contributions can affect your paycheck, try using an online calculator.
3. Foregoing life insurance
44% of millennials overestimated the cost of a term life policy by five times the actual amount in a 2018 study conducted by LIMRA.1 However, life insurance is usually much cheaper for this particular age group than for older Americans.
Whether you're single, or married with children, there's a need for life insurance at just about every one of your life stages. If you were to die today, who's going to pick up the tab for your final expenses, loans and other debts? And if you're married, do you both depend on each other's paychecks to make ends meet? The fact is, being a young and healthy adult, there will probably never be another time in your life where you'll be able to secure such affordable life insurance rates.