Seeing what worked and didn’t work for older generations can help you reach financial goals and avoid some of the most common pitfalls. Millennials who are looking to build financial freedom can pick up a few things from boomers, but there are two boomer financial habits that you should avoid.
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Long-Term Investing
Many boomers who took their finances seriously and achieved wealth did it with long-term investing. They didn’t do speculative options trading and had fewer ways to gamble away their money. Sports betting and online casino apps did not exist when boomers were building wealth. Many of them avoided those vices and focused on long-term assets like real estate and mutual funds.
Many financially disciplined boomers also invested in retirement accounts like 401(k) plans to minimize their taxes. Reducing taxes while growing your portfolio makes it easier to retire on your terms instead of relying on only Social Security checks.
Avoid High-Interest Debt
Many boomers who achieved financial independence stayed as far away from credit card debt as possible. They had fewer ways to spend money — no e-commerce, online subscriptions or one-click purchases. With fewer ways to spend money, it was easier for them to avoid high-interest debt.
Just as a stock portfolio can compound and produce long-term wealth, interest can compound on your balances and destroy wealth in the long run. Living below your means and getting a high-paying job will help you get out of debt and stay out of debt.
Set Financial Goals
Not every boomer set financial goals, but the retired millionaires likely did. Long-term financial goals can help you stay on target and delay gratification instead of spending money as soon as it lands in your bank account.
You can set goals based on long-term horizons, such as making a down payment on a house within five years. However, you should also set immediate goals, such as reviewing your credit card statement and looking for ways to save an extra $100 per month. If you have never reviewed your expenses, you likely have several opportunities to save money.
Relying On Your Employer May Be A Mistake
Boomers were a lot more loyal to their employers than millennials. Pensions and a lower cost of living made it easier for the generation’s workforce to stay put.
Today, you can earn more money in the long run by job hopping. Bouncing from job to job can boost your salary faster than hoping that your employer gives you a 2% raise at the end of the year. You also never know when an employer may fire you over Zoom or invest in AI to replace your job. Picking up side hustles and diversifying your income can give you more financial security.
Spending For Prestige
Boomers aren’t the only generation that’s guilty of spending for prestige. The colloquialism, “Keeping up with the Joneses” was a concept they grew up on. The need to visibly do better than neighbors made people forget about long-term financial goals and opt to buy a large house or a fancy car just to enhance their social status.
In fact, it’s common for rich-looking people to actually be poor and swimming in debt, while people who look ordinary actually have millions of dollars spread across their investments. Living below your means and not caring about what other people think about you can save a lot of money. The less money you spend, especially on the types of purchases that are associated with chasing clout, the more financial flexibility you will have later in your life.
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This article originally appeared on GOBankingRates.com: 3 Boomer Money Habits Millennials Should Steal — and 2 They Should Avoid
