Millennials have some major financial hurdles to overcome. Many of us graduate from college with massive student loan debts. We then receive astonishingly low-paying job offers — or worse yet, sometimes we can't find jobs at all. We sometimes worry about not having enough money to eat and get the bills paid; so things, like saving money for the future and figuring out what the best investments are, can be tough for some of us.
Despite those challenges, many of us are investing our money, and we're hopeful that our efforts will be rewarded in the future. We might struggle in the present, but we dream of enjoying a more comfortable tomorrow.
Unfortunately, some of us are making dumb mistakes with our investments. Here are some of the mistakes that bunches of us are making:
1. Not Taking Advantage of 401k Funds Matching
If your employer offers to match funds that you put into a 401K retirement plan, failing to take advantage of that opportunity is like turning down free money. You have an opportunity to grow your retirement savings much faster when your employer chips in as much as you do.
2. Choosing the Wrong Real Estate Agent When Buying or Selling a Home
Real estate is one of the most significant investments some millennials ever make. There are many mistakes you'll want to avoid when buying or selling real estate. Topping the list of stupid and regrettable mistakes: choosing the wrong real estate agent. The wrong agent can lose you huge sums of money, waste your time and even open you up to legal liabilities you never knew about. The following are a couple of examples to illustrate some of the disastrous consequences you might face if you choose the wrong real estate agent:
Ryan and Jennifer were excited to find a fixer-upper home in Sherman Oaks, California that was actually within their price range. The home had fire damage in two of the bedrooms; but since Ryan was an expert handyman and his brother was a general contractor, the couple wasn't worried about being able to fix the damage.
Their real estate agent advised them to immediately place an offer for the home's asking price and also to offer to pay all closing costs. They did exactly as their agent told them to, but in the end, it turned out to be bad advice. They lost out on the home because another couple was willing to offer more than the home's asking price, and the seller accepted the higher offer. Their real estate agent failed to make them aware that they could have included an escalation clause in their offer — substantially raising the amount of their offer if the seller received higher competing for offers. A more experienced real estate agent would have brought this possibility to their attention, increasing the odds that their offer would have been accepted.
Alex and Sarah made an even worse mistake in choosing the real estate agent who would sell their San Diego, California home. They entrusted the responsibility for their home listing to a family friend who they knew had integrity; unfortunately, their friend was a new agent who had only sold two homes in the area, both of which were much less expensive homes than the one they were offering for sale. The agent under-priced their home by nearly $23,000, as they found out when a local investor purchased the home and flipped it less than a year later for a higher price.
The main takeaway here: It's crucial to do your due diligence in researching real estate agents before you commit to working with one. It's a good idea to ask bunches of your neighbors and local acquaintances for real estate agent recommendations. Numerous websites can help you with your research; many real estate websites offer real estate agent reviews, and there are also internet services that allow you to compare real estate agents.
Once you have accumulated some trustworthy recommendations from people you know, you can interview the real estate agents they've recommended. Then you can use the internet to help you figure out which agent is the best match for your unique situation.
3. Investing Before Paying Off High-Interest Debts
Any debt that accrues compound interest should be paid off before you make investments or buy luxury items. Examples of this would be tax debts you owe to the IRS or high-interest credit card debts. A related mistake is paying off debts in the wrong order.
4. Jumping into Investments With Only Superficial Knowledge
In a recent article called “Millennials are making the same dumb investing mistakes their parents did,” Marketwatch columnist Howard R. Gold points out that Apple, Facebook, and Amazon are some of the stocks that millennials are buying most often. Sure, you might own an iPad; maybe your friends all own them, too. That doesn't mean it's wise to immediately purchase stock in Apple without researching the current market conditions further. Buying a stock without knowing much about it is similar to gambling — which isn't exactly a sound investment strategy.
Before you invest in any company, even one whose products you use on a daily basis, it's wise to research things like up-and-coming competing products in the same niche; the legislation that global and local lawmakers are proposing that might affect the market for the company's products in the future; and what's happening with the top executives in the company. Look for danger signs like top executives dumping their shares of the stock or significant personnel changes that could take the company in a different and maybe not-so-lucrative direction.
5. Not Making Any Investments at All
Many millennials aren't making any investments at all. While it can be tough to put aside cash every month when you have bills and student loans to pay, it's a mistake to avoid investing entirely.
Making an effort to save and invest even a small amount will make a huge difference in how wealthy you become in the long term. Investing $50 per month can result in a long-term accumulated wealth of between $40,000 – $68,000 over a 30-year period. While this will not be enough for most people to retire on comfortably, it beats having a long-term savings of zero. Even if you start small, it's smart to make a start at investing for the future.
If you're making any of these common investing mistakes, perhaps it's time for you to give some thought to whether you could improve your financial game plan. What can you change about your current money management strategies to increase your wealth in the future? Make a plan and take action to ensure your future prosperity.