7 Financial Mistakes Millennials and Gen-Z Make That Set Them Up for a Challenging Future

When you’re just starting out in your adult life, your personal finances can seem confusing and intimidating. Good financial literacy is critical to getting ahead in life, though. Many young people make financial mistakes that take them years to recover from. We’re here to help you avoid that.

The latest generations, millennials and gen-z, are in the midst of a challenging time – wages have not risen to match the increasing costs of goods, and services. Financial mistakes made when they are young will have long-term consequences for them later on in life. Conversely, when you’re young, getting a good start with money can make a huge positive difference later in life.

Here are 7 financial mistakes that millenials and gen-z often make:

1. Financial Mistake: Accumulating Credit Card Debt

Credit cards are a reality of modern life. However, they can easily allow you to live beyond your means and accumulate debt. Keep track of your balance and how much you owe, so that you don’t get caught in a cycle of debt. The top way to keep your credit card debt under control is to set an automatic payment to pay your balance in full at the end of every month. That will force you to spend within your means and will keep you out of compounding credit card debt.

This one financial move will make you dramatically better off than many of your peers. It’s difficult to overstate the negative implications of overspending on discretionary purchases using a credit card that will accumulate interest. 

If you find yourself in credit card debt, you might want to get credit counseling to see if you can 

2. Financial Mistake: Ignoring Your Credit Score

You need to know what your credit score is, not just for opening lines of credit like loans or credit cards, but also because it’s the metric lenders use to determine if they want to work with you or not. Having a good credit score will actually save you massive amounts of money later in life because you’ll be offered better interest rates than those with bad credit. It’s also really simple to get a good credit score. Pay your bills on time, don’t accumulate too much debt, and use revolving lines of credit, like a credit card regularly. 

When you go to make a purchase like a house or a credit card, the interest rate you’re offered can save you thousands, or even tens of thousands of dollars over the life of the loan. It’s worth it to spend the time to get a good credit score, and keep it that way. 

If your credit score is low, or has inaccuracies on it, you should work to get it corrected ASAP. Consider engaging the services like the one below for help.

3. Financial Mistake: Not Paying Attention To Interest Rates

The interest rates you’re offered on loans or credit cards can make a huge difference in the amount of money you pay back. For example, if someone has a 5% APR and pays it off over the course of one year they will have paid back $100 in principal and $25 in interest for a total of $125. If that same person had been offered an 18% APR instead, they would end up paying back about $149. That’s a massive increase in the amount you have to pay back for a relatively small perceived interest rate increase. This is why it’s critical to shop around for loans, particularly for big items.

Credit card interest rates tend to be significantly higher than what you’ll be offered at a bank. If you can’t pay for something you need immediately, but you actually need to buy it, consider taking out a personal loan at a bank instead of putting the purchase on a credit card. It could save you a significant amount over the life of your loan. 

Interest rates for loans from banks can be anywhere from under 3% for those with near perfect credit, to over 15% for those with bad credit history. Like credit cards, certain institutions are also notorious for over charging on interest for unsuspecting consumers. Examples include car dealerships, particularly those that specialize in $0 down, or bad credit, and payday lenders.

4. Financial Mistake: Investing Too Much In One Thing

You don’t want to start investing, only to put all your money in one stock, or even in one asset class. Having a diversified portfolio is critical to helping you avoid losses. The best investors in the world advocate for a balanced portfolio of several asset classes. The effectiveness of this strategy has been proven time and time again.

When investing, consider a mix of stocks, bonds, real estate, cryptocurrency, etc. This doesn’t mean that you should have investments in everything, but rather that you shouldn’t invest more than 30% of your portfolio in any one investment. That way, if one asset class loses value, you have exposure to others, which will help your portfolio increase over time. 

5. Financial Mistake: Taking Out Loans On Depreciating Assets (Like Cars)

If you have to take out a loan to buy a good used car, shop around for the best interest rate. There can be a huge difference between the rate the dealership quotes you, and the rate you’d get at a credit union or bank. You’ll want to keep the loan to 60 months or less since you almost certainly won’t be driving the car longer than that, and you don’t want to have to sell a car with a lien (a loan attached to the vehicle’s title) on it. 

6. Financial Mistake: Failing to Build Emergency Savings

If you don’t have any emergency savings, you’ll be tempted to use your credit card for the small emergencies that crop up. The result is often mounting debt and interest charges for purchases that can be easily absorbed with a modest emergency savings account. Most banks offer easy ways to build up emergency savings by automatically diverting a small portion of your paycheck to another account each month. When an emergency arises, you’ll have that money available to use instead of a high interest credit card expenditure.

Most Americans don’t have $400 for an emergency. That’s a dangerous trend that has put too many people in debt. We strongly encourage you to start putting some savings away, even if it’s just $10/month. If you want to start building emergency savings, you might consider a service that allows you to save for retirement and borrow against those funds as needed. One example is Rocket Dollar, below.

7. Financial Mistake: Overspending on Clothes, Games & Other Non-essentials

Many people spend a significant amount of their money on clothes, electronics, video games or even accessories like purses and sunglasses without considering the consequences this can have in terms of future needs such as saving for retirement or paying down other debt.  If you have a shopping habit, try to get control of it. Tell your friends that you’re saving for a trip, or a new car, so you won’t be going shopping with them as much. Leave your credit card at home so you’re not tempted when you are out. Build up your self control, and it will serve you well over the long term.

Despite what the advertisements tell us, buying new things will not make you happy, but being in credit card debt will make you very sad. This has ruined relationships, destroyed personal finances, and it can take years to recover from. Don’t get caught in that trap!

Examples of the consequences of overspending:

ItemCost Per UnitFrequencyYearly Cost
Latte$62X per Week$624
Sunglasses$110Once every 4 months$440
Clothes$751X per Week$3900
Video Games$601X per Month$720


We hope these 7 tips to help young people make wise financial decisions have helped you. They are simple, easy to follow, and highly impactful. If you follow these tips, you’ll be set up for the big purchases later in life, like a house, and even retirement.

Financial planning for Millenials and Gen-Z can feel intimidating since you’re faced with major financial crises, low paying jobs, and expensive costs of living, and education. However, failing to plan is planning to fail. If you adopt good habit early in life, you will reap the rewards later.