Being in your 20s is a wonderful time of life. You are financially independent and ready to start exploring life. When it comes to your financial future there are financial mistakes that you should definitely avoid. In this post, I’m going to tell you 10 Money Mistakes to Avoid in Your 20s.
These 10 things are the biggest money mistakes to avoid in your 20s. They are also money mistakes to avoid in your 30s as well. Looking back I can tell you that I made many of these mistakes.
But no worries…
It’s never too late to stop making financial mistakes and get on the right path. Avoid these money traps and you’ll be off to a great start.
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Not Having a Budget
Not having a budget is a big money mistake. Without it you will not have a clear picture of how much money you have coming in and how much money you have going out.
Your budget is your money roadmap. When you need to make financial decisions it will help you make the right choice based on facts.
You might think if your income is low then you don’t need to budget. In reality it is exactly the opposite.
When your money is tight your budget will help you to spend wisely and ensure that you are not wasting any of your precious cash.
There are a variety of budget types to choose from. It may take some trial and error to find the one that suits your personality.
The important thing is that you do have a budget and you stick to it.
Not Having an Emergency Fund
Not having an emergency fund is another money mistake that many people make in their 20s.
I most definitely did.
Although we don’t like to think about it, emergency situations will happen. Things like car repairs, health emergencies, and loss of a job are just a few of the things that come and suck up your hard earned money.
An emergency fund is designed to provide you financial protection in case of an emergency. It is money that you save so that when an emergency happens you have the money to take care of it.
It will save you from having to borrow money from friends and family, taking out loans, or maxing out your credit cards.
Not Developing a Habit of Saving
Not developing a habit of saving is a detriment. For some people saving money comes easy. While for others it really takes practice.
If you find it hard to save money, you need to develop a habit of saving. This will you reach financial goals that require large lump sums of money.
When it’s time to purchase a car, house, or even travel having the money saved goes a long way.
Again, you might think that if you income is low you can not save.
If you follow the right steps you can save money no matter how low your income. It might take you longer to save for the amount you need but you can do it.
It is also a plus to start saving small amounts so that it will be easier for you to save larger amounts when your income increases.
Not Planning for Retirement
Retirement is one of the last things someone in their 20s is thinking about. But it is the perfect time to start planning for it.
The most precious commodity you have in your 20’s is time. When it comes to planning for your retirement the earlier you start investing the more money you will have.
Remember, compound interest is your friend.
Just like planning for your retirement, the earlier you start investing your money the better.
Investing may seem too complicated for you to tackle in your 20’s but there are lots of ways to invest that are simple and easy.
If you have a substantial income, you might benefit from getting a financial advisor to help you invest. This will give you the peace of mind that you are working with a professional.
Not Paying on Student Loans
You might be tempted to defer those student loans for as long as you can but that is a big mistake.
If you’re in your 20’s you should start paying on your student loans as soon as you have the money to do so. This will keep you from paying thousands of extra dollars in interest.
It’s also good to not carry unnecessary debt with you into your future.
Not Understanding Credit & Using It To Your Advantage
No understanding credit and using it to your advantage is another mistake you should avoid in your 20s. Most 20 somethings fall into two categories when it comes to credit card usage.
They either go bat crap crazy when they get their first card and they rack up loads a credit card debt that they can’t pay.
Or they have been warned and they are so afraid of credit that they never get their first credit card. This leaves them in a place where they have no credit history at all.
When you are just starting out it is best to understand how credit works and learn how to use it to your advantage. This means getting the right mix of credit cards and paying them off monthly or keeping your utilization low.
Credit history is a factor that plays into your credit score, therefore the earlier you start building a good credit history the better.
Not Living Within Your Means
Not living with in your means is an easy money trap from 20 somethings to fall into. It’s really easy to see people living a lavish lifestyle on Instagram and want to purchase those things.
The key here is to have a budget and know what you can afford.
It might not be the best idea to buy your dream car in your 20’s. Start out with a car that meets you budget. Preferably a used car that you can buy with cash and not have a monthly car payment.
That super lavish apartment over looking the city might not be the right road to take.
Not Having Multiple Sources of Income
Not having multiple sources of income is not the biggest money mistake you can make in your 20s but it is worth mentioning.
Having more than one income source gives you an extra level of padding when it comes to unexpected life changes. The 2020 COVID 19 pandemic is the perfect example of a very unexpected global occurrence that affected a lot of people financially.
Having and emergency fund and multiple sources of income definitely helped out during this time.
Not Being Intentional With Your Finances
And finally the biggest money mistake you can make in your 20s is not being intentional with your finances. This means not purposefully managing your money and having financial goals.
Your 20s is the perfect time to start learning how to manage your money and set your first financial goals. By starting small and starting early you will build some of the key skills and habits that will help you build wealth as you get older.
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