Aussies aged 25 to 34 comprise that group known as ‘millennials’. If you’re in this group, you’re probably already well aware of some of the challenges facing your generation, like high rents, poor housing affordability and high student debt. Because of these, getting ahead and starting early with wealth-building is more important than ever. So, what are the costly money errors to avoid if you want to set yourself up financially?

1. Spending beyond your means

With the availability of credit and endless temptations, it’s easy to spend beyond your means. Whether it’s a new phone, a holiday you can’t really afford, or eating out too often, expenses large and small do add up. You could end up going into debt sooner than you’d think. Relying on credit cards to get through the weeks before you get your next pay cheque is a related mistake. If you retain a balance instead of paying it off, you could end up paying a lot in interest charges, which is another drain on your wealth.

Understanding the power of regular savings, investment options, compound interest, along with how a small amount grows into a large sum over time, can help motivate millennials and encourage them to take charge of their wealth-building. Budgeting is a great way to better understanding your money and the power of savings.

2. Neglecting to budget

With a budget, you should identify what you’re saving for and lay out a clear plan for achieving the goal. Start by working out what you’d like to achieve, whether it’s an overseas holiday, a car, paying off loans, building up an emergency fund, or saving for a deposit on a home. Next, add a deadline and amount to the goal. Finally, rank your goals in order of importance.

With a budget, you can avoid the common error of failing to manage your cash flow. Mastering cash flow means tracking your spending and becoming smarter about how you spend. When you project what you’ll spend and save, track it, so you’ll make smarter choices about your expenses.

Learning to budget and save could help you get together a deposit for a new home, which is a major challenge for many millennials .

3. Not taking out health insurance

Young people in Australia areturning away from private health insurance, but millennials might find having private health insurance is actually better than not. First, there are the penalties you could pay. A Medicare Levy Surcharge of 1% applies if you’re a high income earner without private health insurance, and you can end up paying the extra 2% under the Lifetime Health Cover loading program if you don’t have hospital cover after turning 31.

Second, if you experience an accident or illness, you could end up paying a lot of money for surgery if you need to use the private health system. Not having private health insurance could be a gamble millennials might be better off avoiding.

4. Failing to save for retirement

Putting extra money in super and other long-term investments could ensure you end up with enough money to live comfortably in retirement. As a millennial however, retirement can seem far away – too far away to worry about. Some millennials might be failing to start early enough and save enough for retirement. This can be a costly error when you hit retirement age and start relying on your nest egg.

Another related costly error of millennials is spending what should be retirement savings or extra super contributions. Instead of diverting that money into your super fund or investment vehicle, you use it on expenses like holidays, cars, and other personal items.

5. Keeping savings as cash

Some millennials might be opting to keep their savings in cash instead of investments. However, even with a high-interest account, your savings could be eroded by inflation over the long term. For this reason it could be better to hold your money in safe investments, like blue chip stocks, once you’ve saved enough for a sizeable cash buffer for emergencies.

6. Not boosting your earning potential

Boosting your earning potential can help you get a better job, so focus on building your resume withqualifications, extracurricular activities, and work experience. Look for ways to stand out as a team player and communicator, as this is what employees value.

Millennials face a combination of financial and life challenges, so it’s critical to stay on top of your finances and have an action plan for building wealth. Budget, save, and live within your means. Start saving for retirement early and learn about investing so you can put your money to work. By avoiding these major errors, you could avoid common pitfalls and establish a solid foundation for the future.

Financial education is very important but doesn’t come overnight. Fortunately you can always use our personal loans if needed.