10 Financial Mistakes you should Avoid in Your 20sBy Caitlin in Money
Your 20s can be a financially challenging time, you’re in university trying to pay for it and then you graduate and are still trying to pay for it and on top of all that you’re trying to decide what to do with your life. So it’s no wonder why most 20-somethings make some pretty awful decisions what it comes to their money. If you’re in your 20s here are 10 financial mistakes to avoid, your 30 year old self will thank you.
1. Not Saving for the future and your retirement.
This could end up being the worst financial mistake you make during your 20s. When you’re fresh out of university and still in your early 20s, retirement seems so far in the future. But the reality is that you absolutely need to start saving for your future right away, even if you’re only working at a minimum wage job. There is no way to tell what will happen in the future and the economy is constantly changing so starting to save for the future as soon as possible is your best bet for a financially sound life and retirement.
2. Spending too much on a car.
Finally being able to afford a new car is a great feeling especially if you’ve always driven a rundown hand-me-down. But most of the time a brand new car is not necessary and can be a huge financial burden that you’re not completely ready to handle. Just because you got a great job with a great salary right out of university doesn’t mean you need to spend most of it on your dream car. Once the interest rates for the loan and the insurance start to add up you’ll be spending more money than you originally planned and any thought of saving will be put to the back burner. Cars are great and a necessity but don’t jeopardize your future for one.
3. Forgetting about an emergency fund.
With rent, car payments and a student loan all to think about, starting an emergency fund is probably the last thing you want to deal with. But guess what? Is just as important as all those other things and needs to be a priority so start now before it’s too late and there is actually an emergency that needs to be dealt with and paid for.
4. Using your credit cards to live.
A credit card is not a source of income and should not be used to live off of. Spending yourself into deep credit card debt in your 20s can and will seriously affect your financial future in a negative way. You will spend thousands of dollars trying to pay it off over countless years and it will put your ability to save for an emergency or your future at risk. Stop using your credit cards irresponsibly before you put yourself into a situation that you can’t get out of.
5. Having no financial goals
Setting financial goals early on is the only way you’re going to be able to achieve anything with your hard earned money. If you don’t make a plan, write down a budget or decide what your financial goals are you’ll be more likely to be irresponsible with your money. It’s easy to forget about being financially responsible if you’ve never thought about your goals. Take an hour to think about your future and write down a few goals that way when you’re on the fence about going on an expensive vacation or purchasing an expensive item you can think about your financial goals and make a better choice for your future.
6. Trying to maintain the status quo.
It’s easy to forget that most people have worked hard for decades to get the jobs, salary and homes they have so trying to maintain the status quo can be a very dangerous thing to do. Your first “real” job probably won’t pay as much as you hoped and you’ll still have debt from being in school, having a huge house, nice cars and a fancy wardrobe won’t be financially possible for you for a long time. Keeping up with the joneses could put you further into debt and make all those nice things even harder to attain down the line.
7. Not paying yourself first.
If you’re having trouble saving money because you tell yourself every month that you’ll save “what’s left over” then you need to start paying yourself first. This means that you need to treat your savings account and or emergency fund like a monthly bill that absolutely needs to be paid each month. You pay off all your bills including your savings account and then the money that’s left over is yours to spend how you want.
8. Having a lot of student loan debt for a degree you didn’t want.
It’s hard to decide what you want to do with your life when you’re in your late teens and early 20s but if you’re going to need student loans to go to university then you should think about your degree very carefully. There is nothing worse than having student loan debt well into your 30s for a degree that you hated or were forced to do. There is no guarantee that your degree will be useful but if you enjoyed taking it then paying off the debt it caused will be a little less painful.
9. Spending too much on a wedding.
Yes you’ll remember your wedding for the rest of your life but it’s better to remember because of the great memories not because of the excessive amount of debt you accumulated. There are a lot of great ways to have a smaller and less expensive wedding, potentially setting you and your significant other up for financial ruin is not a great way to start your marriage.
10. Not having health insurance.
When you’re in your 20s and barely have money to pay for rent and food having health insurance is definitely not a priority but it definitely should be. Having one extra bill to pay each month could potentially save you from having a huge medical bill to pay.
Finances are difficult in your 20s and they sometimes can seem out of control but it’s important that you make them a top priority. Having a good financial foundation in your 20s will allow you to be more financially stable in your 30s and 40s. Avoid these 10 financial mistakes and you’ll be on your way to financial stability in no time.