7 Biggest Financial Mistakes to Avoid in Your 20s
The twenties are a tough decade. The pressure to spend a lot of money on everything from courtship to school is constant. And as you transition to adulthood, there are many things to sort out.
However, spending management should be one of your top concerns. Also, most youths aren’t always well-prepared for the school process to grasp financial duty. And in truth, without the right teacher, finance can be pretty dull.
With the economic recession due to the COVID-19 pandemic, it is very vital for you more than ever to develop financial literacy in your 20s.
However, mistakes do occur. But these mistakes may cost you money. So you’re safe if you can avoid costly mistakes when money is at risk.
But if you can’t, prepare yourself by learning. So in this article, you’ll learn about some of the biggest financial mistakes to avoid in your 20s. Keep an eye out.
1. Taking on Chunks of Credit Card Debts
Before you started your first job, as an average college student, you most likely had a credit card. Credit cards can be helpful to provide for your comfort. It is also useful in the creation of your credit history.
However, credit cards can also lure you into spending more than you can afford. And you often have the lowest wages in your 20s. As a result, your credit card expenses may seem excessive.
Thus, you will get lured to settle simply the minimum balances. But if you continue to pay only the minimum balance, you will get chunks of credit card debt interest. As a result, your credit card debt will pile up due to the interest.
Sadly, many people in their 20s lack the financial maturity to manage credit. So, any age you are today, decide how to rescue your future self from chunks of credit card debts.
As a general guideline, avoid using credit card debt until you can pay it off each month. Have you already accrued chunks of credit card debt? Then you have to start paying it off fast. There are Cheap Credit Repair services that will help you to find solutions for credit-related problems. These quality services will help you in avoiding mistakes that harm your credit score.
2. Having No Budget Management Skills
Many in their 20s see budgeting as having enough cash on hand to cover expenses. And as such, spending is simple for people in their 20s.
The reason is that they don’t keep track of the money coming in and going out. So, for example, they may think they only buy coffee once every two weeks, but the total spending can get up to $50 monthly.
Therefore, budget management is about being aware of your spending pattern. If you can’t track where your money goes, then it’s time to face reality. You should improve your budget management skills.
These skills will help you keep track of your needs and wants. But it will also expose the luxuries you buy daily.
In addition, you can use a budget tracker tool to help you handle the task. It will help you track your savings, debts, and bills. As you get older, managing your money will only get more complex. So, it’s essential to practice budgeting today.
3. Omitting Savings
Early saving is vital. The future appears so far away to many people in their 20s. As a result, they find it difficult to begin saving.
Starting a savings account is the best way to ensure your financial future. The reason is that compound interest has positive effects. It promotes financial growth, but only for a while. Keeping money aside will not only give you compound interest benefits, but it will also serve as a safety net in case of unforeseen costs.
Below are some of the unforeseen expenses which you should plan for:
- Your taxes.
- Your auto repair.
- Your healthcare, dental, or vision costs.
- Upgrading your electronics and so on.
Without any savings, you’ll soon find yourself in major money problems. The reason is that sudden expenses are unavoidable. Therefore, it’s best to plan and stay away from more expensive options.
4. Avoid Delaying Student Loans
Most people start their twenties already burdened with college loans. And most of them often carry debts for decades. So it can be tough for you in your 20s to decline the option to postpone a loan. But by doing so, you extend the debt burden.
As a result, you can continue to be in debt down to the period when you will begin a family or purchase a home. Therefore, verify if your intended career sector demands you to take a pricey schooling path. A trade school, certificate, or apprenticeship will also be good if it’s not needed.
So if you already have an unpaid student loan, it is best to pay it off fast. As a result, you can easily navigate the next stage of your life.
5. Making Purchases on a Whim
In a world of instant satisfaction on Instagram, it’s simple to make the mistake of chasing a stylish lifestyle, even one you can’t afford.
So, avoid attempting to appear wealthy in your 20s and focus on amassing riches instead. But most young adults assume rich people spend their money on only nice auto cars and designer apparel.
However, you won’t ever have financial liberty if your only goal is to appear rich. So instead, consider saving and investing money to increase your fortune before you spend any money. After that, you can buy the delights with the money you earn from your investments.
Note that you are not rich if you don’t have actual money left over after all of your expenses. And people will see you as a poor person wearing fancy clothes and shoes.
6. Depending on Your Loved Ones
Even the bond between a parent and their child may become tense due to money issues.
However, it’s unsafe and unwise to fall behind on your rent because you spend your money on social activities. But it’s not wrong to have parents open to help when you’re broke.
In reality, having a support network is good during trying times. But be mindful not to abuse anyone’s kindness.
Having a stable financial future is a core part of adulthood. So, please don’t feel it’s your right for your parents to help you out of a financial mess you caused yourself. Also, other bonds like your friends or partners are not supposed to help you always. So remove money as a factor to maintain such bonds.
On that note, while you’re in your 20s, ensure you have a solid financial base so you won’t need to borrow money from others. But if a sudden financial issue arises, ensure the loan you secure is one-time or temporary.
7. Staying Alone
Living alone is a huge part of the freedom many people in their 20s seek. And they feel having a roommate will rob them of that freedom. However, having a roommate can help you save and be less burdened. It can also help you get your freedom faster.
Also, staying with your parents is a much faster way to save up the money you need to stay alone.
For example, you can save the money that would have gone into rent, feeding, and other bills that are sure to spring up if you were to live alone. You may be subject to ridicule, but don’t feel ashamed because they wish they could do the same deep down.
Your twenties are a period of major change. It is either you’re completing your education or beginning your first career. As such, It’s easy to make some financial mistakes when so many changes happen at once.
Also, most of these mistakes can have a long-term impact on your financial health. Discussed above in this article are some of the biggest financial mistakes young adults should steer clear of. It can be from failing to budget to not saving and many more.
If you avoid these mistakes, you will slowly get your finances in order.