Millennials & Money: 5 Mistakes I Made Before I Became a Penny Hoarder

Millennial money
Kelly Smith puts her cap on prior to the University of Tampa college graduation at the Florida State Fairgrounds in Tampa, Fla Saturday, May 6, 2017. Tina Russell/The Penny Hoarder

People like to rag on millennials. They say we’re bratty, spoiled and waste our money on things we don’t need. The thing is though, that’s just not true.

Millennials are actually more open to talking about money matters than other generations. We’re learning from our student loan experiences while also striving to foot the college bill for our children.

Sure, we like our fancy lattes, but we budget accordingly — and smartly.

Before I started working at a personal finance website, though, I made some major financial mistakes. Considering I’m in my early 20s and still in school, it makes sense — I never really learned how I should manage money.

Thankfully, though, since I started working at The Penny Hoarder last year, I’ve become more financially savvy. I’ve learned some major money lessons — and I fixed my mistakes before they negatively affected my life.

Money Mistakes I Made Before I Worked at The Penny Hoarder

Here are some of the biggest money mistakes I made — and what I learned from them:

1. I Didn’t Have an Emergency Account

In 2016, GoBakingRates conducted a survey about millennials and their savings habits. A whopping 62% of those surveyed had less than $1,000 in their savings accounts.

Thankfully, I’ve always been pretty good at saving money; I broke my first $1,000 when I was 17. I’ve always considered that account to be my cushion in case anything unexpected happened to me.

Recently, though, I ran into an emergency when my car was towed — and I was reluctant to pull funds out of that emergency account even though I needed my car to get to school and work.

I couldn’t figure out why I felt so bad about using my rainy day fund, so I reached out to financial experts about the right and wrong times to pull money from emergency savings. They helped me realize that even though I was saving money, I was still making a huge mistake: My emergency account also held my savings.

Emergency accounts should be separate from savings accounts. You should use a savings account to accumulate money toward a particular goal and spend it once you reach that target. Combining your savings with money reserved for an emergency makes it hard to determine how much money you’re saving for each.

I now have two separate accounts for my emergency funds and savings, and I feel much more comfortable drawing money from my emergency fund when something goes awry.

2. I Paid Way Too Much for Rent

Since TPH writer Kelly Smith moved to St. Petersburg, she takes advantage of local parks including North Shore Park to walk her dog. Tina Russell/The Penny Hoarder

Before I learned to assess my finances, I locked myself into a 12-month lease for an unaffordable apartment. I fulfilled my lease, but I just barely got by each month — even with some help from my dad, who agreed to pitch in since I was still in school.

I’m not the only millennial who has struggled with obscene housing costs. The New York Times reports that around 40% of 22- to 24-year-olds get help with rent from their parents. The article states that “America’s rapidly changing labor market is making it harder to find economic security at a young age,” and millennials are struggling to make ends meet as a result.

At the time, I had multiple jobs — but I still wasn’t making enough to afford the apartment on top of all of my other expenses.

I didn’t know how hard my rent was hitting me financially until I created my first budget for an assignment.

Once I did, the number became so much more real to me. After researching the recommended percentage of income that should go to rent, I realized I was making a huge mistake by overspending on my housing costs — and I decided to do something about it.

Now, I know to only pay 30% or less of my monthly income on rent, if possible. While I’m not quite there yet, I recently moved closer to my job and my rent dropped by $600.

There were sacrifices that came with this reduced cost: My previous apartment had almost 800 square feet, granite countertops and a walk-in closet. My current apartment is around 600 square feet. My closet is so small I had to donate a good chunk of my wardrobe to charity.

But I see this downgrade as totally worth it because I’m no longer struggling financially each month.

The best part is this move is also saving me big in other areas: My gasoline costs dropped by $80 per month, and my car insurance is down $40 per month, bringing my total monthly savings to $720.

3. I Didn’t Have a Rewards Credit Card

I’m not sure if there’s anything I love more in this world than traveling. As much as I’ve traveled, though, I always paid full price for plane tickets — which isn’t necessary!

My co-workers are well-traveled — and considering they’re true Penny Hoarders, they know how to travel on a budget.

I wasn’t among the many millennials who don’t have credit cards at all. But after talking with a few co-workers, I realized I wasn’t opening the right ones.

One of my co-workers told me about how she was able to travel on the cheap thanks to a rewards credit card.

Rewards credit cards can score you free airfare or hotel bookings if you rack up enough points — and that sounded like a dream to me, so I decided to open one.

I paid off my roughly $2,500 in existing credit card debt before opening a rewards card. And no, paying it off wasn’t easy. I picked up every opportunity I could to make money. At one point, I had a full-time internship, a freelance gig and a paid position on my university’s newspaper. I didn’t sleep much.

To rack up points quickly, I use this credit card like a debit card for all of my expenses. To avoid nasty interest charges, I make sure to pay the card off in full each month.

The best part? I could travel to New York for free in a few months, or at the rate I’m racking up points, I could head to Europe for free by the end of the year!

If you’re considering opening a travel rewards card, make sure you do so responsibly. If you carry high balances each month, you could end up paying huge amounts in interest.

4. I Wasn’t Paying Off My Student Loans Early

Kelly Smith is hugged by her mother after the University of Tampa college graduation. Tina Russell/The Penny Hoarder

Before learning more about student loans and how they work, I believed one of the biggest student loan myths out there — that you can’t start making payments on them until you graduate.

While researching common student loan myths, I discovered that many students incorrectly think you can’t pay off a student loan until you graduate.

I started slowly working my expected payments into my budget. These days, I’m already hacking away at my student loan debt — and I still haven’t graduated yet. I plan to save thousands in interest payments as a result!

5. I Blew My Financial Aid and Tax Returns

TPH writer Kelly Smith smiles as she receives flowers from her sister after her graduation ceremony from the University of Tampa. Tina Russell/The Penny Hoarder

I really hated admitting this to my co-workers, but I couldn’t run from the truth: I spent thousands of dollars from financial aid and tax returns on trips abroad.

Do I regret it? No. But after writing an entire post on what not to do with a financial aid return, I felt foolish. If I had the chance to do it all over again, I would save little by little for big travel expenses — not just blow an entire check on it.

Because I have no credit card debt, I can still do something productive with any extra money that comes my way: Invest it!

One of the smartest things I’ve learned to do with extra money is to put it in an individual retirement account (IRA). I’m lucky enough to have a 401(k) here at The Penny Hoarder, but I can always do more to save for retirement.

When I’m ready to stop working, I don’t want to worry about how I’ll afford it — and having two investment funds will help make sure I won’t.

Kelly Smith is a junior writer and engagement specialist at The Penny Hoarder. Catch her on Twitter at @keywordkelly.

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