How Millennials Can Recover From Their Financial Regrets
Discover Millennials' biggest 2021 financial woes and their 2022 goals, according to a MoneyGeek survey.
Almost half of Americans (47%) are considering a financial resolution for 2022, according to a recent survey by MoneyGeek. So what happened in 2021 that sparked a revitalized money mindset? For Millennials, it boils down to wishing they had better managed debt, budgets and investments.
Whether it was a late bill payment, racked up credit card balance, an overextended budget or scaled back retirement contributions, it’s possible for Millennials to bounce back from these money missteps and achieve their personal financial goals.
Financial Roadblocks That Shaped a Generation
Even before dealing with a worldwide recession brought on by a pandemic, Millennials (those born between 1981 and 1996) have endured chaotic financial markets. This included the 2000 dotcom blast and the 2008 Great Recession, which arguably shaped both the younger and older Millennials as they were coming of age during a financial crisis and its post-recovery period.
Biggest Financial Regrets Uncovered
During COVID-19, financial shifts continued for Millennials. The MoneyGeek survey uncovered that 30% of Americans' financial situation improved in 2021, while 23% had worsened. The top three reasons for the decline included changes in household costs and employment and unexpected expenses such as medical or natural disasters. In fact, one in five Millennials indicated that unexpected expenses impacted their finances in 2021.
While some circumstances are seemingly unavoidable, such as a layoff or natural disaster, 73% of respondents indicated some regret surrounding their financial decisions in 2021. Those included not paying down debt, budgeting effectively and investing wisely. The good news is that 57% of Millennials believe that in 2022 their financial situation will improve, while only 10% believe it will get worse. Going forward, Millennials surveyed intend to pay down debt, budget, invest smartly and find a new job to help improve their financial situation in 2022.
Here are financial goals to help address Millennials regrets and financial intentions.
Create a Roadmap to Financial Improvement
After recognizing your financial regrets, identify where you need to change your money habits so you can establish your short-term and long-term financial goals, such as saving for a house, increasing retirement savings, building an emergency fund or paying off student loans.
Here are some steps you can take to achieve your personal financial goals and improve your financial outlook for 2022.
Establish, manage and maintain a budget
Without a monthly budget and plan, it can be easy to get sucked into buying the latest mobile device, those trendy sneakers or overextending your credit to pay for something that you could wait to pay cash for. But tracking your spending habits and adhering to a monthly budget is empowering as it'll help you balance saving with spending so you can work toward your personal financial goals.
Develop a good savings strategy
There are ways to put money aside, even if your finances seem stretched. There are several strategies to tackle your debt and get out of the hole quicker. One you can start immediately is setting aside a few dollars a month to help establish a savings habit. Additionally, if you scale back on unnecessary subscription services, eating out and online shopping, you can use that money to pay down high-interest credit cards, installment loans and other debts.
Another strategy is for every bill you pay off, continue to use that payment amount and add it to your savings funds. Having it automatically deposited into your account each pay period or monthly will also make it easier. As you build your savings, you can set up a rainy-day fund to cover unanticipated expenses, such as car repairs or home repairs, and eventually, an emergency fund to cover your monthly expenses for at least three to six months to help with rent or mortgage, utilities and car payments.
Invest early and wisely
Considering Millennials' experience with financial markets, debt and the economy, it makes sense if there is hesitation about investing. However, as Millennials start earning higher salaries and increasing savings, they should embrace strategic investing — and there are ways to do it well even in stressful times. And with new technology, apps and free online resources, it’s more accessible and easier to do.
To get started, educate yourself using free online resources such as beginner-focused educational materials on brokers' websites or this beginner’s guide on investing and saving. You can also start a retirement fund, such as a 401(k) offered through your employer or an IRA, to benefit from tax-deferred growth. Make sure you take the maximum contribution amount if your employer offers matching funds to your 401(k). It's free money!
So why does investing make a huge difference to Millenials? Nowadays, there are fewer employer-sponsored pension plans for Americans and the longevity of Social Security is uncertain as funds are expected to expire before Millennials would reach full retirement age, which is 67. Without a proper savings plan in place, Millennials could end up working past retirement age.
Self-Reflect and Grow in Your Financial Journey
Financial regrets are not uncommon. Many people make money mistakes. The key is to self-reflect and use them as lessons to establish financial goals that can improve your financial outlook.
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