This is the biggest financial mistake a millennial can make, says Broke Millennial author Erin Lowry

Millennials and their money habits are frequently front-page news.

And while this generation is often ridiculed for frivolous spending on oat milk lattes and bottomless brunches, the truth is that Americans ages 25 to 40 are spending more on essential expenses ⁠— like housing, education, health ⁠and child care — than previous generations. These essential costs have been rising in recent years, but wage growth hasn't kept pace. 

So how can millennials be proactive about their finances while also acknowledging that sometimes the cards are stacked against them? And what should they prioritize when trying to figure out where to put their limited resources? 

Select spoke with Erin Lowry, author of "Broke Millennial Talks Money" and "Broke Millennial Takes On Investing" about the biggest financial mistake she sees millennials making and steps they can take to get back on track.

The biggest financial mistake that millennials can make is not saving for retirement, says Lowry. 

Millennials frequently cite two reasons why they aren't putting away money for their future, she says. The first is the issue of not having enough leftover to put toward retirement once they cover essential costs and pay off any outstanding debt, like student loans or credit card balances. 

The other reason is that many don't believe they'll see a future because of existential threats like climate change, so they don't see a purpose in saving for it, says Lowry. In fact, a 2021 Pew study found that nearly 70% of Gen-Zers and millennials believe that the climate should be considered "a top priority to ensure a sustainable planet for future generations."

 While Lowry empathizes with millennials who fear climate change, but she urges them to still focus on building a nest egg for retirement.

"You really are guaranteeing yourself a personal financial apocalypse if you don't prepare," says Lowry. "It's important to remember previous generations have faced hugely significant world events, and that we still have persisted."

Whether you fall into the first bucket of millennials who aren't investing because they don't have enough money or the second group who think saving for the future is futile, there are steps that anyone can take to make an actionable plan for investing for retirement. 

To get started, Lowry recommends you begin by taking a look at your budget to understand how much money you earn, how much you will need to cover your essential expenses and how much you need to put toward debt repayment.

Once you have a sense of where your money is going each month, you can take steps to prioritize future you. Lowry recommends that people start investing whatever amount they can and take advantage of their 401(k) employer match. 

For example, if your employer is willing to match 4%, you don't have to start by contributing 4%. You can start with 1% and work your way up, increasing every few months. By slowly increasing your contribution over time, you won't see immediate, dramatic changes to your cash flow, Lowry explains.

If your employer doesn't offer a 401(k), you can open a Roth IRA (individual retirement account) instead. With a Roth IRA, your contributions are taxed up front so you don't pay taxes when you start withdrawing money at 65. (Read more about how Roth IRAs work.) This is a good option if you anticipate being in a higher tax bracket later in life.

Traditional brokerages like Charles Schwab and fintech firms like Wealthfront offer IRAs with no minimum deposit, a variety of different investment options and free resources that help you plan for retirement.

If you're looking for some retirement investing guidelines, Fidelity Investments recommends you aim to have the equivalent of three times your annual salary saved by the time you're 40.

But don't panic if you're not anywhere close to that number. Saving for the future can be difficult, especially when you have so many competing expenses in the present. But it's also crucial. According to a 2019 TD Ameritrade study, nearly two-thirds of millennials (age 23 to 38) surveyed said they needed to catch up on their retirement savings.

Yet, millennials also get a bad rap. They're far more prepared than many people give them credit for: On average, millennials have more money saved up in their 401(k)s in 2018 than Gen-Xers did in 2002.

While Lowry encourages people to start saving ASAP, she also urges millennials to be compassionate with themselves in the process of making a budget, especially if they've faced a major financial setback like losing a job due to the pandemic. 

"So many of us do not get a proper financial education. We're not taught how to pick investments in our 401(k). We're not taught how to handle planning and saving for the future in a really actionable way," she says. "We hit adulthood and think that somehow we're magically meant to know all this and then we get embarrassed about asking. It's okay to ask. And it's okay to admit that you don't know."