There are a lot of ways that we measure ourselves against our peers financially – cars, houses, vacations, etc.
It's SO easy in this world of social media for people to make their lives look better than they really are, and it can create a distorted reality for young people to chase.
One of the missions of this site has been to cut through that stuff and help millennials focus on the things that actually matter. Enjoying and appreciating your own life is so much more important than worrying about what other people are doing.
Managing your money well and growing your net worth throughout your lifetime is a legit skill that you can use to make your life better – especially when we're all at the end of our working years later on.
Here are five financial mistakes you need to avoid to grow your net worth:
1. Not ACTIVELY tracking your money
If you weren't aware – FinTech has been exploding lately. It seems like almost every other day I'm getting an email from a new financial startup that has some cool money-related technology.
Unfortunately, a lot of these companies don't end up making it for whatever reason. But the ones that do tend to put out some killer products.
If you don't do anything else on this list or even read the rest of the article, you need to make sure that you're actually keeping track of your money in real time and seeing how your day to day decisions are effecting your net worth.
I really like Personal Capital because it's no-brainer easy, but even sitting down and reviewing all of your various accounts every month is a big step in seeing where you are financially.
Read also: My review of Personal Capital
It honestly doesn't matter to me if you're using Mint, Personal Capital, or an Excel spreadsheet – push yourself to get more comfortable looking at your net worth (even if it's negative for now).
2. Letting lifestyle inflation creep in
This is SO hard not to do. Even as a personal finance blogger, I've noticed that I'm much more likely to consider buying something that I would have never touched a few years ago as my income has increased.
Most of the M$M readers I've come across have big goals with their student loan debt, building businesses, or any other number of things that you're all focusing on right now.
Eventually, you WILL get to the point where either more money is freed up or more rolls in because of your hard work.
It's a great feeling, but if you let your lifestyle creep up at the same pace (or faster) than your success…you'll still be broke.
3. Financing depreciating assets
AKA cars. 🙂
Seriously though – let's discuss new cars really quickly. According to Cars.com, the average new car price in 2017 AFTER incentives is $31,400.
Now, let's pair that with a Polk study done in 2012 that predicts Americans on average will buy nine cars over their lifetime.
Read also: I Deserve a New Car…Right? Wrong.
These are obviously rough numbers and there are a ton of variables to consider (we aren't even adding in interest paid over that span of time or future inflation), but 9 x $31,400 = $282,600.
That's a quarter of a million dollars spent per person on something that is best known for rapidly being worth less than what you paid for them. Crazy.
Even if you spend half of that on cars, you could have at least $125,000 more during retirement. Talk to any retired person, and I guarantee that they would love to have an extra $125k laying around.
4. Sticking with one income stream
I've pounded it over and over again on this site. Creating multiple income streams is a great way to increase your net worth AND help you sleep better at night.
Second income streams are basically a form of insurance. You never know when your company might have to cut back or if you decide you want to change jobs. That's just life – it actually does happen.
And no, your second income stream doesn't have to be a complex business model. I've seen things from running a blog like this one, to knitting scarves and selling them on Etsy.
My mother-in-law knows how to hustle old furniture on eBay and Facebook groups…and she's 55 years old.
There aren't many excuses for millennials to not be out there trying something haha.
5. Waiting to develop a plan for retirement
This is one of those things that a lot of millennials are really struggling with right now and might not even know it.
Being young is great because we can run fast and still jump higher than 6 inches…but one of the disadvantages is that we don't understand how quickly time will pass over the next 30 years.
Every person that I've talked to over the age of 50 wishes that they had started saving for retirement earlier. Every. Single. One.
Even if you have other goals you're focused on right now, you should be developing a strategy for when and how you want to retire, and what you need your net worth and retirement funds to be when you get there.
Please get started (today).