You can make a lot of money mistakes in your 20s, since they are an extremely tumultuous time in everyone’s life. You should keep in mind that the habits you form during that stage of your life will affect you for a very time, and that your financial mistakes and desperate choices can be pretty hard to clear up. It’s not so difficult to learn how to keep you finances under control. You just have to try a little harder, so you don’t accumulate any debt, because avoiding those costly money or credit mistakes can save you a lot of time, money and even stress. As a young adult, you’re getting a lot of responsibilities, like the fact that you must pay off your student loan, then you get your first job and you might even want to start a family. It’s extremely important to learn how to manage your money in a responsible way, so you won’t feel overwhelmed by your financial choices later. Here are a few very important money mistakes to avoid in your 20s, so you'll feel more financially secure:
In my opinion, this is definitely one of those money mistakes that everyone should avoid if they don’t want to get into debt. When you fall behind on your payments, you will end up paying all kinds of late fees or other taxes, and you will find it even harder to get out of debt. It’s actually a vicious circle that it’s pretty hard to break. Make sure you don’t neglect your student loan repayment and try to make it fit within your budget.
You should always know how much it costs to live your lifestyle or how much money you spend on different things each month, so you have a very clear picture of where your money is going and on what. Do you have any spending habits that you can’t afford and that you should cut back? Review your budget on a regular basis, to see if you have any extra income or if you have to cut back any expenses, so you don’t accumulate any debt.
Do you have any costly habits? Are you fueling an overspending habit? By spending more than you can afford on a regular basis, you can really damage your monthly budget, you can get into debt and you might even find it hard to break that bad habit. Try to be a mindful spender and keep track of all you purchases. Also, try to discover the psychological triggers for your shopping sprees and keep this unhealthy behavior under control.
I know that when you run out of money it’s extremely tempting to use your credit cards for everyday expenses. You should fight that temptation though, because the interest rates on credit cards are extremely high and you will only get more into debt. Studies show that people tend to spend more money when they pay using their credit cards, so this habit can really affect your monthly budget. Try to stick to your budget, cut out any extra expenses, try to live on a cash-only basis and set those credit cards aside for things that are really important.
I know you might think that you’re too young to think about retirement, but there are a lot of reasons you should keep in mind that will convince you that this is one of the best things you can do in your 20s. Among those reasons to start saving now I must mention: tax breaks, employer matches and compounding. Also, your tax rate in your 20s is probably lower that it will be later, so your income will rise, since national debt might push tax rates up in the future.
When you have a financial plan, you’ll do everything in your power to reach your financial goals. A financial plan will help you know if it’s wise to invest money sometimes, you will know if your spending matches your priorities, how much money you’ll need to save for retirement or if you should make any other financial decisions. Try to set some solid financial goals, work hard to fulfill them and make sure you review them every year in case you need to make certain adjustments.
I know you think that going without insurance will help you save a lot of money, but the truth is that your insurance is actually your safety net, since it will protect you from bankruptcy. Make sure you have basic insurance coverage, so you can protect yourself from different potential problems in the future.
Creating a solid financial state is never easy but if you act responsibly, work hard and persevere, you will be able to make the right choices and avoid all those money mistakes that could affect your finances in the future. Have you made any of these mistakes? What did you do to correct them? Do you know any other mistake someone should avoid when they are in their 20s? Please share your thoughts with us in the comments section!
Sources: lifehack.org, moneyfor20s.about.com, finance.yahoo.com, forbes.com