I have the great pleasure of being close friends with a Financial Advisor. So basically, whenever we hang out, I just bug him and ask a bunch of questions about my finances and he tells me what I'm doing right and wrong. His official title is "Associate Wealth Management Advisor" but I like to call him the "Money Man with a Plan." He doesn't like that very much. if
}Anyway, I figured since he's been a sounding board for me, I'd take advantage of his wealth of knowledge (see what I did there?) and ask him some basic questions. What are some common mistakes millennials are making with their finances? credit: MSNBCLet me preface all of this by saying that mistakes are made by everyone with money. You would be surprised to find even some very wealthy people do not understand how money and savings principles really work. I guess that is why people like me have a job! For millennials, the most common mistakes I see are really twofold: 1) Not having a plan for your money and 2) not paying yourself first (aka saving money every month before the money is spent). Both come down to one word: Intentionality. First, the most basic mistake is not having a plan for your money. So many young people simply earn money and spend it without regard for the future. In doing this, they become reactive to long-term/short-term savings goals and not proactive (aka emergencies/future large purchases/debt reduction, etc.). This is not to say you need a 50-page financial plan using all the most efficient tax strategies and various savings vehicles, but being intentionally ignorant to the ways you can build a solid financial plan, is also a plan. And it is a bad one. Here's a tip I have: write down what you would like to accomplish in 2/5/10+ year increments. Writing these down will help you visualize the goals and make them real. Once you do that, you can attach a dollar figure to each goal and work your way backwards into a monthly savings target for those goals. Even if you begin with $100/month, create those habits of savings, you will thank yourself later for doing so. And the second mistake? Not paying yourself first (aka saving money each month before you spend it.) Another very common mistake is to take your paycheck and start the hierarchy of outflows (rent/utilities/groceries/Birchbox/vacations etc.). Often left until last on the list, saving money (this also ties back into not having a plan with your money). You can see where I am going with this. Most of the time people spend money what they need, then comes the wants, and bringing up the rear, saving towards your financial goals. If you don't make a habit of paying yourself first, it oftentimes becomes a neglected part of your month to month financial plan. A mistake easily changed. I tell my clients all the time, finance is 80% habit and 20% knowledge. If you create sound habits and know a little about savings, you will be just fine. What do you feel is the main difference between budgeting as a millennial versus the baby boomers and gen-xers? credit: Under 30 CEOThe primary difference between the two groups is the complexity of the budget (amount of things to control/pay for) and the willingness to create one. I will say that I do not want to paint with a broad brush because there are certainly budgets if you saw them written down, you could not tell what age group produced them (Example: me. My budget looks as if a 50 year man created it). Most of the time, budgeting is a methodical, boring, and sometimes frustrating task. Older clients seem to understand this is a necessary evil of being financially sound while millennials while tend to take a "fly by the seat of the their pants" approach. Even with the prevalence of apps and technology, many millennials think budgeting is not needed. Again, tools and knowledge are at your fingertips. Action/habits are what make or break anything in life, finance/budgeting is no different. What's your one budgeting tip that you would tell to your millennial clients? credit: GettyThe one tip I would give to millennials in terms of budgeting is to simply do it. Commit to for 3 months and determine if understanding your actual numbers month to month moves you to action/change (1 month isn't enough). When we help people get on track in terms of saving money or paying down debt, the progress they make breeds enthusiasm. Enthusiasm moves you forward towards the financial goals you set for yourself/spouse. I know for some millennials "commitment" is an ugly word but your money deserves it. A budget will create a structure and understanding. When you have both these things, you have control of your money and the more control you have, the better decisions you can make. A budget is the most basic financial tool available to all. One of my favorite quotes is"If you don't know where you're going, you'll end up someplace else."-Yogi Berra. If you don't know where you are spending/saving money, how can you achieve your financial goals? The takeaway from this, in my opinion, should be the intentionality of your money. When you have a plan and stick to it, you can achieve almost any financial goal. We see older clients become more intentional with money as they progress through their careers and throughout life. Maybe that can be attributed to expanding responsibilities (children, homes, taking care of family), work promotions or simply gaining further understanding of the importance of money. Regardless of your income and stage in life, using a budget as a baseline should be the starting point for anyone. Once you determine where you stand, you can move forward with creating a plan. Paying yourself first/saving money towards this plan is a habit and can be done by not only older clients but millennials alike. The advisor quoted here has chosen to remain anonymous due to compliance issues.