Financial Planners Say These Are The Two Things Millennials Spend Too Much Money On
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It happens to the best of us, millennial or not: Something catches our eye that we don’t need, like a trinket or kitchen appliance we don’t need, and, voila, there goes our money.
Many modern financial gurus liken healthy spending and savings habits to a diet. It’s a helpful metaphor: No one feels great after sitting down to eat just eating a bowl of ice cream for dinner. But you do feel pretty good earning the bowl of ice cream after balanced meals of salads, whole grains, and non-processed foods.
A balanced financial diet is important for thinking about the things we spend our hard-earned money on – including the things we shell out cash for at a premium.
In a conversation with two financial planners, Insider broke down the two perilous ways millennials overspend.
According to financial planner Clari Nolet from Team Hewins, millennials overspend on convenience.
This includes items that are designed for instant gratification, many of which are a part of everyday life. For example:
- Ordering meals via a food delivery app
- Ordering groceries via an app
- Meal prep services vs. common grocery stores
- Over-utilizing ride sharing apps
- Buying clothes online at a price that’d be more expensive than in stores
All those little purchases – usually made out of convenience – add up over time. An important way to break these habits, according to Nolet, is to create a budget and stick to it. Not an estimate – a hard an strict budget. Most millennials don’t even know, for example, how much they spend on these items that are strictly out of convenience.
If you ask somebody what [they] spend, they can give you an answer, but if you really dig into the details, you find that they’re fooling themselves. The amount that they’re spending is typically a lot more than they think,” says Nolet.
By using a budgeting app like Mint or Wally or setting a weekly spending limit for convenience items, you can stay on track with your financial goals and avoid overspending on unnecessary purchases.
The second thing millennials overspend on…
IE, the YOLO items. Cars, houses, trips to a music festival. Insider talked to financial planner Asad Gourani of AG Wealth Management, who noted concern over overspending on mortgages and cars, especially since millennial tend to heavily spend on experiences.
“After years of working almost exclusively with millennials, we noticed that the big theme is that millennials tend to spend a lot more on experiences rather [than] material items compared to prior generations, which is a very positive thing as long as it falls within their means. Where the problem generally lies is with un-calculated spending habits and lack of planning, especially around bigger-ticket items. Trust me, skipping on avocado toast and lattes won’t make much of a difference on your finances.”
So don’t stress over the little things you enjoy. But do worry about blowing the bank on the big ticket items that seem irresistible or have an inflated sense of importance to your lifestyle.
It’s like working hard on yourself to lose weight, only to put it back on in a couple weeks with cheeseburgers and ice cream.
Reflecting on your own spending habits and making a plan for how you can reduce overspending is a crucial step towards achieving financial stability and meeting your long-term financial goals.