6 Money Mistakes Millennials Keep Making in Today’s Economy
Balancing saving for the future with living your best life isn’t easy anymore, especially with the economy constantly shifting and new money tools popping up monthly. Relying on these habits can throw even the most responsible millennial off track, sometimes in ways that backfire.
These common financial missteps continue to trip up millennials in subtle yet compounding ways. Let’s learn what they are and how to steer clear of them.
Treating Budgets Like a “Maybe” Instead of a Must
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Most millennials know they need a budget. But treating it like a New Year’s resolution that fades by February? That’s where things go sideways. A 2024 Forbes Advisor survey found that 57% of millennials say poor budgeting is why they live paycheck to paycheck. Making a budget part of your weekly routine can help you spot waste, stress less, and save more.
Swiping Now, Figuring It Out Later
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Credit cards are handy, but they’re not free money. Without a solid payoff plan, interest adds up fast. That minimum payment might keep the lights on, but won’t shrink your debt. In fact, the average millennial now carries over $6,600 in credit card debt, which is double what it was a few years ago. Aim to treat them like short-term tools, not long-term loans.
Letting Lifestyle Creep Eat Your Raise
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Millennials now spend an average of $70,000 annually, nearly matching their $71,566 median income. As incomes grow, so do expectations. It starts with a little splurge, then suddenly you’re upgrading your phone, your car, and your rent. Even as you earn more, living slightly below your means builds financial flexibility that far outweighs the perks of lifestyle inflation.
Skipping the Emergency Fund
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Unexpected expenses are inevitable. Yet many millennials keep just a few hundred dollars on hand. The key is to start small; even $500 can soften a surprise expense. Emergencies don’t wait until you’re ready. Whether it’s a flat tire or a layoff, not having backup cash can quickly lead to credit card debt—or worse.
Jumping Into Shared Finances Too Soon
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Financial experts warn against combining finances early on. Instead, keeping things separate and transparent is the best way to ensure a reliable financial status and a healthy relationship. Sharing bills too early can complicate relationships, too. Moving in together might save on rent, but mingling bank accounts, loans, or credit right away is bad.
Letting Investing Apps Do All the Thinking
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Apps that round up your purchases and toss spare change into the market sound cool, but too much automation can turn investing into “set it and forget it,” which works until markets dip or your risk level spikes. Experts caution that while apps make investing easy, they can lead to overexposure in correlated assets with little regard for true diversification.
Thinking Small Wins Are the Whole Game
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Yes, skipping the $6 latte can help. But if you’re not also negotiating your salary, looking for higher-paying roles, or building side income, you’re missing the bigger picture. The truth is that you can only cut so much, but your earning potential must grow. Focus just as much on offense (earning more) as defense (spending less).
Pressing Pause on Retirement Savings
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Stopping 401(k) or IRA deposits during market downturns may seem smart, but it undercuts long-term gains. Skipping employer matches, losing compound interest, and missing low-cost share opportunities means giving up future value for temporary relief.
Overstretching on Rent or Mortgages
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Did you know many millennials are spending 30% or more of their income on housing? Just because you can get approved for a certain rent or mortgage doesn’t mean you should. Spending too much on housing, especially in high-cost cities, can quietly choke your savings goals. This leaves little room for emergencies or retirement. Comfortable shelter shouldn’t cost peace of mind.
Going All-In on Trendy Investments
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Millennials and Gen Z investors are three times more likely to hold alternative assets than older generations. But putting all your money in one place (especially something volatile) is risky. Diversification is still the name of the game. Mix some bonds, index funds, or real estate exposure to cushion the bumps.
Ignoring Taxes Until It’s Too Late
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Gig work, side hustles, or freelancing are great for income, but bad for taxes if you’re not paying attention. Missing a quarterly payment or forgetting to track income could result in penalties and a nasty surprise bill. Pro tip: Set aside 25–30% of freelance income for taxes and use an app to track expenses. Better a little prep now than a lot of panic later.
Using Tomorrow’s Money to Solve Today’s Problem
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Credit card advances, payday loans, or dipping into your 401(k) might feel like lifesavers in the moment. But they can drag out the pain for years. Using tomorrow’s resources to solve today’s problems sets up future hardship. Building stability takes time and restraint, not quick fixes. Debt is a slippery slope—it’s easier to avoid than to escape.