Avoiding Classic Financial Mistakes for Young Investors

According to an FINRA Investor Education Foundation study, millennials have low levels of financial literacy. It’s great to get an early start on managing your finances, but those in their 20s and 30s don’t always have the right instincts. Let’s discuss some of the classic financial mistakes that young investors can avoid.

The first mistake is not saving up sooner. It’s never too early to start growing your nest egg. It’s also important to make sure you are saving enough. A great rule of thumb is to save 10% of every paycheck. A 30-year-old with a salary of $30,000 could have a nest egg of over $600,000 by retirement age if they abide by the 10% rule. This is a hypothetical illustration and is not intended to reflect the actual performance of any particular security. Future performance cannot be guaranteed and investment yields will fluctuate with market conditions. Investing involves risk and you may incur a profit or loss regardless of strategy selected.

Another common mistake is taking on too much debt. The FINRA study revealed that over half of millennials are concerned that they have too much debt, and just under 20% admitted to spending more than their income. Budgeting can help immensely. Even though it’s best to have a financial planner take a look at your specific situation, an app that tracks spending can also help you realize where to reallocate your funds.

Failing to monitor your progress can also create problems down the road. Once you have a plan in place, don’t assume everything will automatically go according to plan. Have at least a yearly check-in with your financial planner to ensure things are going how you’d like. Avoiding common financial mistakes can be easy with the right guidance. Contact the advisors at Financial Consulting Group today to book a consultation.