If I could go back in time and talk to myself at age 22 -- oh, who am I kidding?
There was no getting through to that kid!
Not to sound like an “old guy dishing out all my wise advice to the youngin’s – heh
heh”, but if you can still avoid these common money mistakes people make in their 20s, trust
me, you’ll be doing yourself a big favor!
1.
Trying to keep up with the Joneses We all have at least one friend who’s constantly
getting the latest and greatest.
New phone, designer clothes, nice car, vacations around the world.
And how do you feel?
Like a jealous boring potato.
But chances are those people are living their dream in debt up to their eyeballs.
Don’t try to keep up with the cool kids if it means owing the bank a bunch of money,
plus interest!
2.
Buying an expensive car I’m not saying you shouldn’t buy a car
at all, but this is a balancing act.
Most young people want the cool brands that all the celebs are driving.
But you know what?
That G-Wagon isn’t just going to put you in debilitating debt – prices for repairs
and maintenance will also be through the roof.
That said, don’t go years throwing money into your old high-school clunker.
Know when it’s time to upgrade, but be reasonable about your budget and lifestyle.
I mean, do you really need 500 horsepower to go buy groceries or sit in traffic?
3.
Over-spending on rent Remember the one golden financial rule: don’t
spend more than 30% of your income after taxes on rent.
In fact, split your income 50-20-30.
That means 50% goes to rent, food, and transportation altogether, 20% goes to savings, and 30% on
what you enjoy.
Also, don’t start fancying up your first apartment with Pinterest-inspired remodels.
Save that for when you own, and that time will likely come a little later.
4.
Moving to the big city Unless you’re doing it for an awesome well-paid
job you’ve been offered, think twice before heading to a major city.
They do have round-the-clock entertainment, shopping, and endless cultural events, but
are you sure you can afford all that at the moment?
You might not even have enough left for the fun stuff after you pay for your rent, bills,
and groceries!
5.
Overspending on food When you finally move out of your folks’
house and you don’t have your parents cooking for you every day, it’s too tempting to
eat out and order delivery for each meal.
Fast food might seem cheap, but when you compare it to cooking at home and packing leftovers
to work for lunch, it’s a waste.
Also, take full advantage of coupons and deals on groceries, and look at the price tags!
Seriously, a lot of young people just grab what they need and head to the check-out lines…
6.
Diving head-first into credit cards Your parents might tell you it’s a good
way to build your credit, but that’s only if you’re responsible with that magic plastic
card.
If it’s too tempting for you to swipe the credit card on luxury stuff you don’t even
need or if you can’t afford to make the monthly payments, hold off on diving into
the credit world.
It’s best to wait until you’ve got a decent job and a reasonable head on your shoulders
than to get a card, not make the payments on time, and ruin your credit.
7.
Not caring about your credit history Now, let’s say you’re ready to take that
dive.
Great!
Again, if you use your credit card responsibly.
Make all your payments on time, don’t open too many accounts at once, and keep the amount
of credit you actually use as low as you can compared to your limit.
And don’t forget that your other bills, like electric, internet, and so on, can affect
your score.
You don’t get brownie points for paying those on time, but it can hurt you if you
don’t pay and the company reports it to a debt collector.
And check your credit score periodically.
There might be a mistake on there, and you should know so that you can dispute it!
8.
Not planning for retirement Here’s a surprising fact most 20-somethings
don’t consider: the sooner you start putting money into a 401(k) or some other retirement
account, the more time this money will have to gather interest and grow into some serious
cash for your golden years.
Think about it: if you start saving retirement money at 25, you’ll have 50% more than if
you start at 35!
It’s a good idea to put aside 10-15% of your income just for your retirement plan.
Yes, even when you’re in your 20s and retirement is many many years away!
9.
Not taking student loans seriously Although it’s nice when you can avoid taking
out student loans in the first place, the sad truth is a lot of us are stuck with them
for YEARS (even decades!) after we finish school.
My advice is to make your loans your #1 priority in your 20s, and put the biggest dent in them
that you can.
Your other choice to put them in deferment or forbearance (that’s like a pause in your
payments) so that you can save up for a beach getaway with your friends looks so nice!
But that big stone ball rolling down the tunnel chasing you -- trying to crush you like in
Indiana Jones is what debt looks like close up.
Once you get older, your money will be going to all the fun things that come with age.
Home renovations, your family, health bills!
Come on, make it easier on your future self!
10.
Ignoring insurance When you’re young and full of energy, you
feel untouchable.
Unfortunately, no one in this world is 100% safe from any troubles, disasters, or illnesses.
Renter’s insurance will save you tons of money in case of a fire, flood, or break-in.
Medical insurance is a must for emergencies that can otherwise cost thousands of dollars.
Have a cushion under yourself in case bad things happen!
11.
Cutting financial corners in all the wrong ways
How can you even consider getting regular medical check-ups when you’re 20-something,
broke as a joke, overworked, and having sleep for dinner every night because your student
loans, rent, and bills are eating up your whole paycheck?
I know, I was there too.
But cutting corners at the expense of your physical and mental health is NOT the way
to do it.
There are healthier ways to deal with your financial troubles.
Talk to your lenders about getting on a plan that fits your income.
If your pay is really so miniscule that you can’t feed yourself, then it might be a
good time to negotiate your salary look for something better, or even come up with a good
side hussle…
12.
Avoiding calculated risks Yes, changing jobs is a risk, especially when
you need money!
But if there’s a skill you’ve always wanted to learn – do it now.
If you’ve always wanted to start your own small business – try it.
It’s always easier and wiser to do all those things before you’ll have to consider the
needs of others (like your partner or kids).
Those calculated and well-thought-out risks are often worth it, both financially and life-wise.
13.
Not discussing money issues with your significant other
Your 20s are your first step in adulting, and that often means living with your significant
other.
And, boy, is that a real test!
Instead of all the rainbows and butterflies, you’ll now be sharing bills, setting aside
a certain amount for mutual goals, and talking about money!
Or, at least, finances SHOULD make their way into your conversations.
It can seem uncomfortable to talk about money with your partner, but you have to do it if
you plan to get serious with that person.
If you have vastly different views on saving, investing, and spending, you’ll be unlikely
to reach any financial goals together.
14.
Getting pets Hey, I love pets as much as the next guy!
But they are expensive, there’s no doubt about that.
Food, toys, vaccines, unforeseen vet trips (oh, that last one!) – if you’re barely
getting by taking care of yourself, how can you bring in a furry friend and afford all
that stuff??
Pets come with a whole slew of financial obligations, so only get one when you (and your bank account)
are absolutely ready.
15.
Impatience I’d say the #1 biggest mistake people in
their 20s make, is thinking they should have their financial and professional life already
in order.
They expect their first job to be their ideal career, they want the nicest apartment or
house immediately, and nowadays a lot aren’t willing to settle for anything less than perfect!
Listen, you’ll change jobs, there will be plenty of times when you need to tighten your
belt, trust me it’s good for you -- you’ll have both good and bad experiences – but
they’ll all help you in the end.
Hey, how do you think I came up with the items on this list?
Been there, done that, and now I’m trying to pass the word on to you guys!
So, how about you?
Are you also guilty of any of these mistakes?
Let me know down in the comments!
And by the way, don’t feel guilty.
Just learn from it, and move on.
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Enjoy, and always stay on the Bright Side of life!