Tag Archives: Financial Planning

5 Financial Mistakes Millennials Are Making

 

Even as the U.S. economy as a whole recovers from the Great Recession, Millennials (those born from the early 1980s through the early 2000s) continue to struggle with student debt and slow job growth. The lackluster economy and student debt aren’t the only things holding back Millennials from attaining financial independence and success.

Image courtesy of stockimages | FreeDigitalPhotos.net
Image courtesy of stockimages | FreeDigitalPhotos.net

 

Let’s take a look at five mistakes Millennials tend to make–and see how we can correct them.

 

1. Avoiding a budget

One of the most basic mistakes–not budgeting–can lead to living beyond your means. This puts pressure on your future financial plans and goals, even if you have  a good eye for what things like groceries or car insurance usually cost. Doing the math and knowing if you’re breaking even or able to save more each month is crucial for building a buffer against debt. It can be as easy as starting to use a new online or mobile budgeting tool. You don’t even need to leave your desk.

 

 

2. Misusing credit cards.

According to a study by the credit-reporting agency Experian, Millennials are struggling to pay credit card bills on time, while also having one of the highest credit utilization rates of the four generations listed. Credit utilization, also known as the debt-to-credit ratio, accounts for the ratio or rate of your balance (what you owe) compared with your overall credit limit.

 

From the study, Millennials’ average rate is 37 percent, which is above the 35 percent or less that creditors prefer. As a result of these two factors–late payments and high credit utilization–Millennials have the lowest credit scores across all four generations. Consider a credit score as a financial report card, which means you should turn in everything on time and pay the balance in full every month.

Experian Study

 

3. Renting forever.

It’s no secret that Millennials are not active homebuyers. Homeownership is important to consider because ultimately it costs more to rent a home than to buy one in many areas. Plus, Millennials do not build equity when they rent indefinitely. Of course, many Millennials still find themselves traveling and exploring without plans to settle down yet, but in the event that a reasonable deal on property comes up down the road, it would be wise to consider purchasing.

 

 

4. Saving little to nothing for retirement.

Surprisingly, two in three Millennials intend to retire by age 65, but approximately 70 percent have not started saving for retirement, according to a 2013 survey by MainStreet.com and GfK Roper Public Affairs & Corporate Communication. Even more disconcerting is that half of all Millennials plan to draw income from Social Security, even though full payments from reserves are set to cease in 2033.

 

The journey to retirement begins with a single payment, then another. If you’re lucky to have any employer’s 401(k) matching plan, take full advantage of it and make above-average contributions. If not, build your own IRA, choosing a Roth or traditional IRA, and set aside a percentage of your monthly income toward it.

 

 

5. Skipping life insurance.

Getting insurance in general may seem daunting, but it’s good to consider the various types, even ones you don’t hunk you need at first. Life insurance is one that might not have come up yet, but there are reasons to consider it.

 

One of the benefits of getting a life insurance  policy early on is that it will likely cost you less now than later–life insurance is cheaper the younger and healthier you are. Plus, you have no idea if your health might change, which could make getting coverage much more expensive or even impossible later on. And remember that co-signers on any financial accounts you have may be liable for your debts should anything happen to you.

 

 

From the basic act of budgeting to considering life insurance, these actions can help ground your financial future. Saving for later in life is the foundation for having a debt-free life and securing retirement plans. As a Millennial you may still be finding your way in this economy, but you can help prevent any of these five financial mistakes from adding to your burdens.

 

by John Kuo

John Kuo is an analyst for NerdWallet. He specializes in investing and insurance. Through transparent tools and content, NerdWallet helps consumers make sound financial decisions.

 

 

Millennials Show More Anxiety About Financial Planning Issues

 

 

Younger Americans show the highest level of concern across all generations for common financial planning issues, including saving for retirement, paying for a child’s education and burdening others with final expenses…

 

Woman stressed by financial issues
Image courtesy of David Castillo Dominici | Freedigitalphotos.net

 

If you are a millennial (between the age of 25-34), have you started planning for your financial future? According to the 2014 Insurance Barometer Study, released earlier this month by nonprofit Life Happens and LIMRA, it was found that younger consumers are noticeably more anxious about their financial plans, despite being best suited to take actions now that can make a difference.

 

 

 

 

 

 

 

 

The study reveals that…

– Half of consumers age 25-34 (52 percent) state they are very or extremely concerned about having sufficient funds for a comfortable retirement, compared with just 47 percent of consumers age 35-44.

 

Education costs
Image courtesy of hywards | Freedigitalphotos.net

 

 

– Nearly a third of millennials (27 percent) are as concerned about paying for a child’s schooling and burdening others with final expenses (28 percent).

 

 

 

 

– Consumers under age 25 show the most worry of all age groups when it comes to paying for medical expenses (43 percent are very or extremely concerned), leaving dependents in a difficult situation if they were to die prematurely (38 percent), and paying for a child’s schooling (36 percent).

“Having come of age through the recession and facing uncertainty about the future of employer and government protections, millennials are having to take personal financial responsibility to ensure their future plans are secure,” said Marvin Feldman, CLU, ChFC, RFC, President and CEO of Life Happens. “Life insurance can provide stability and financial peace of mind and yet, while younger Americans recognize its importance, they lack a basic understanding about it, which may be hindering them from getting the coverage they need.”

 

According to the study, nearly one third of adults overall (31 percent) believe they would feel the financial impact from the loss of a primary wage earner within one month of their passing.

 

About 65 percent of consumers agree that they personally need life insurance and one in four (27 percent) believe they need more. One third of those surveyed under age 25 (33 percent) and age 25-34 (29 percent) say they need more.

 

The two most commonly cited reasons survey respondents provided for not purchasing more life insurance?

– 63 Percent cited too expensive

– 59 Percent cited having other financial priorities

 

Doctor giving thumbs up - you're approved
Image courtesy of stockimages | Freedigitalphotos.net

 

 

The irony of this is that younger Americans are generally more likely to qualify for preferred rates because of their age and health status.

 

 

 

 

 

It’s unfortunate that people have a misguided idea about how much life insurance actually costs. On average, people assume the price for a $250,000 level-term life insurance policy for a healthy 30 year old is $1,000. That’s nearly 10 times its actual cost of $150 a year! Overall, more than 80 percent of Americans surveyed overestimated the cost of life insurance and this misconception has been around for some time.

 

The best course of action is to get a quote from your insurance agent to know for sure how much life insurance will cost you. Call the Reno Agency for your free life insurance quote today, at 269-792-2232.

Image courtesy of pakorn | FreeDigitalPhotos.net
Image courtesy of pakorn | FreeDigitalPhotos.net

 

Financial planning for millennials needs to begin now. Begin the conversation with a certified financial planner (CFP) so you can first become educated on retirement funds and life insurance, and second so you can create a game plan for your financial future.