3 misconceptions people have about millennials and money

When it comes to money, millennials are arguably the most critiqued. Some say the generation is full of frivolous spenders, tossing out dollars on lattes and avocado toast. Others say they’re weary to invest or make long-term financial commitments. Some boomers argue millennials don’t know the value of a dollar.

This week, Inverse explores how millennials actually spend their money, and how they can build a financially sound future — even when they don’t know where to start.

Douglas Boneparth, a financial advisor and author of The Millennial Money Fix, tells Inverse that sweeping generalizations about the more than 70 million millennials are common but misguided.

“The truth is that the financial habits of this generation are highly stigmatized from what they've experienced, starting with the 2008 recession,” Boneparth tells Inverse. “Millennials don't want to blow themselves up without a safety net because they watched the entire economy melt down.”

I’m Ali Pattillo and this is Strategy, a series packed with actionable tips to help you make the most out of your life, career, and finances.

Myth #1: Millennials don’t invest in the stock market.

Millennials aren’t more financially reckless than previous generations. They’re just more cautious.

It’s no wonder millennials are more hesitant about sinking savings into long-term investments when they’ve observed the previous generations’ financial commitments go up in flames, Boneparth tells Inverse.

In 2008 and 2009, millennials watched the older generation and their parents lose jobs and businesses, he explains. They also started out in the workforce on shaky ground when the job market was pretty much depleted.

“Starting your working life in one of the worst financial environments since the Great Depression is pretty jarring, if not traumatic,” Boneparth says. “And that trauma, ultimately, has an effect on how the generation views a number of things: the labor market, their own finances, their ability to save, their ability to invest.”

At the end of the day, millennials are slightly less trusting of sinking their savings into the stock market. But investing cautiously, with a safety net, isn’t necessarily a bad thing, Boneparth says.

Myth #2: Millennials “only live once,” sacrificing long-term goals for current gain.

Across the board, millennials tend to have more student loan debt, are less likely to own a home, and live paycheck to paycheck.

However, these spending patterns aren’t inherent to the generation but instead a result of the circumstances they’re put in. According to Boneparth, millennials have the same goals as previous generations, but the financial hurdles stemming from the 2008 financial crisis have shifted their timelines.

“Marriage is being pushed off, savings for retirement pushed out, starting families pushed out, home purchases pushed out,” Boneparth says. “You get this compounding effect and all of these things definitely get instilled in the psyche of a generation.”

Millennials are also less likely to stick around with a particular employer for decades. That’s not because they aren’t interested in a pension or corner office, but because the workforce is more entrepreneurial than past decades. This evolution democratizes opportunities and contributes to more job instability.

“I don't think holes or gaps in financial education are limited just to millennials.”

While millennials may be less trusting of the traditional path to success, it’s likely they are more agile and adaptive in a rapidly changing world.

Myth #3: Millennials are less financially savvy than previous generations.

Ultimately, without robust financial knowledge, everyone tends to make bad decisions when it comes to money.

“I don't think holes or gaps in financial education are limited just to millennials,” Boneparth says. “Everyone suffers from this, and it shows up with having a lack of control over one's financial life — and that starts with cash flow.”

Very few people do a great job of getting to know how money comes in and out of their life and understanding “what a sustainable lifestyle is relative to what their financial goals are,” Boneparth explains.

“It's extremely difficult for anyone to know themselves well enough to identify what their financial goals are, quantify them by time and value, and prioritize them in a way that you can account for your first and last dollar of savings,” Boneparth says. “None of it is learned overnight. None of it happens automatically.”

Luckily, personal finance isn’t rocket science, Boneparth says. It just takes an honest look at saving and spending.

“Personal finance is one of the few things in life that you can learn relatively easily that can change your life for the better,” Boneparth says. “The mechanics are super easy. The behavior and personal part — dealing with your own self, brain, feelings, and emotions -- that's the hard part.”

The key is to balance two competing forces, he advises: a subjective lifestyle and savings for future goals. It’s more than just the numbers; it’s behavioral, he adds.

“There is your absolute desire to achieve goals, whether they be short or long-term, and your desire to go for a jog on the ‘hedonistic treadmill,’” Boneparth says.

How to take financial control of your life:

Save the budget for later— What people usually do when they approach their finances is make a budget, which is nonsense, Boneparth says. That’s because they aren’t reflecting on what they’re actually spending, but instead outlining what they wish they spent.

Gather data to make informed decisions— Grab the last 12 months of expenses, credit card statements, and checking account statements and input the data into an app or Excel spreadsheet. This may seem tedious, but Boneparth says it can help you reconcile cash flow, a fundamental step in becoming more financially savvy.

Rethink your spending— With a detailed yet comprehensive view of your financial reality, you can make a budget you can stick to and set realistic financial goals. With these guideposts, you can pinpoint opportunities to save or invest. Maybe you skip that fourth weekly meal out or weekend trip away and reinvest that money.

Put it into practice— The best way to make financial goals a reality is to put your budget and lessons learned into practice. “Try your best and don't judge yourself after one month; judge yourself after three, six, nine, 12 months, and make adjustments where you need to,” Boneparth says. Do this process over and over again and map out your goals. Now you're in control of your cash flow. That right there might be “70 percent of all of personal finance,” Boneparth says.