FML: The Soundtrack of the Financially Irresponsible. Six Bad Money Decisions for Millennials.

“Yeah, you know no better
Yeah, you know no better (Yah)
Yeah, you know no better
Ooh” — Travis Scott (Know No Better)

The wealthiest top 10 percent of America controls 76 percent of the nation’s wealth. The families that saw their wealth grow by 54 percent between 1989 and 2013. On the other side, folks in the top 50 percent saw their wealth grow by a mere 4 percent, while those in the bottom 25 percent saw their wealth decrease by 6 percent during the same period.

Growing wealth over time is a product of smart financial decisions driven by healthy money habits. In my recent post, we discussed research that revealed most wealthy households aren’t full of “trust fund babies” and contrary to popular belief work their way into the elite class in America. So what exactly are they doing that the average Joe isn’t? Better yet, what bad decisions aren’t they making? More than half of the battle is “not screwing up”.

“They wish I would go ahead and f*** my life up
Can’t let them get to me
And even though I always f*** my life up
Only I can mention me” — The Weeknd (FML)

Here’s a list of the top bad decisions that folks are making in their 20s.

Living Without a Budget

In an earlier post, I compared the average American’s financial behavior to using Google Maps without entering a destination. One of the easiest ways to get lost on your journey to wealth is to live life without a budget. If you don’t know how much you can afford to spend during “nights on the town” while still saving 15 percent of your take-home income, you’ll probably also have a hard time growing your wealth more than 4 percent over 25 years. You don’t have to use an Excel spreadsheet like your parents did. Technology makes the job easier. Use Mint. Once you get the hang of it, you’ll find that budgeting really isn’t that hard. Practice makes perfect.

Not Having Financial Goals

People who create goals have a higher probability of achieving them. No different with goals for building wealth. Your goal may be to create passive income streams that surpass the costs of your recurring expenses. Maybe another goal is to become a millionaire. Your goal can be whatever you want it to be. The beauty of goals is that they spur action. Set a goal and then create a plan to reach that goal. If you have ambitious goals then you’ve got to act ambitiously to reach those goals. It’s that simple.

Not Investing in Your Financial Education

No one can do the work for you. Books, seminars, workshops, and mentors. There’s no easy route to financial success. More knowledge leads to more informed financial decisions. Better decisions lead to better outcomes. If Mint confuses you the first time around, take extra time to check out a tutorial online, or talk to a friend that’s been using the platform for years. Don’t do the same thing and expect different results. Take ownership over your education.

Keeping up With the Joneses

You know you shouldn’t brunch this weekend. You know that you can’t really afford that car payment. Living on the “nice side of town” may be “baller”, but it’s outside of your budget. “Keeping up with the Joneses” is the primary pitfall of many Americans, especially folks in the middle class. That’s where the budget comes in handy. You know that certain purchases will put you over your limit, so simply don’t swipe the card. If you make enough quality decisions, you’ll soon be in better financial shape than the Joneses.

Not Paying Yourself First

The Richest Man in Babylon talks about paying yourself first. Basically, you should send a portion of your income directly to savings before you even think about paying bills. This forces you to base your budget around a healthy savings habit. The average American saves 5.6 percent of their paycheck. Many experts recommend saving at least 10 percent. Think about your financial goals and do the math.

Waiting to Invest

You probably should have started investing a week ago. It’s not hard to get started. Let compound interest be your friend. The earlier that you invest, the more returns you stand to gain. A dollar invested today is better than a dollar invested tomorrow. Not only will your pockets thank you, but the lessons learned from having actual “skin in the game” will serve you well in the long run. You don’t have to start out with a brilliant investing strategy; just put your money into ETFs. Educate yourself along the way.

There are loads of other bad financial decisions that people make like…

• Not establishing credit
• Maxing out credit cards
• Late credit card payments

And…

• Defaulting on student debt
• Not saving for retirement
• Not saving for emergencies
• Not getting insurance
• The list goes on…

Avoid a majority of these mistakes and you’ll likely be in good shape financially. And of course, above all, find ways to increase income early and often. Income is what makes the whole world go ‘round. If you don’t increase your means, you can’t increase the amount that you send to saving and investing. It’s really the biggest piece of the puzzle. Want to buy more? Make more mula.

What things can you start doing today to increase your chances of financial success? Feel free to like, share, comment, and follow me on Medium.com!

Fin