There are certain traps that people fall prey to all of the time without even
realizing it, for example, maybe you open up YouTube and then three
hours later you're like, oh, I'm still on YouTube.
But social media traps are not what we are talking about today.
Today, we are talking about money traps that people fall prey to,
especially in their 20s, even in their 30s and later in life.
I am Tiffany Thomas with Wealthy
Tiffany Dotcom, and I achieved financial freedom at age thirty eight.
And if you are looking to achieve financial freedom at a young age as well,
hit that like button and hit the subscribe button and we're going to dove right in.
There are five money traps that I want to talk about today.
A lot of people have fallen prey to these money traps and they can really kill or
even delay your goal for financial freedom.
The first money trap I want to talk about is not using credit cards properly.
When you are in your 20s and you have your new career and you think, OK, yeah,
I want to open up a credit card and you don't really know how to use your credit
card properly, then you can accumulate a very large balance on your credit card
and get into a lot of debt, which will take a lot of time to pay off.
Because if you are only paying the minimum
payment on your credit card, you are paying a ton of money in interest.
And if you want to know how to use credit
cards in the smart way, I did create a video for you.
So I will leave a link above and below and you can check that out later on.
But I get it. You want your credit card right now so
that you can spend money on going out to dinner or going to the show
with friends or even traveling, whatever your dreams are.
But by swiping that credit card all the time, it can really turn into a lot
of debt, which you'll have to pay off in the years to come.
So if you are getting a credit card,
be very careful to pay off that credit card every month in full.
And I don't know if they still do this, but when I was in college,
they would have some sort of fare or something outside and a whole bunch
of different vendors would come, including credit card vendors,
and they would try to get you to sign up for their credit cards.
And it can be very tempting because they say, oh, yeah, you can have a two thousand
dollar limit and spend whenever you want to.
And they don't really tell you
the repercussions of not paying off your credit card in full every month.
So be careful if you are receiving those
credit card offers in person or if it is just in the mail.
All right. The second money trap that a lot of people
fall prey to, and this can be in your 20s, 30s or even later in life.
And this is buying a brand new car or a luxury car.
If we are in our career and we are making
pretty good money, we're thinking, oh, I totally deserve a brand new car.
That would be awesome to have my friends
right in my car and I can have this luxury ride.
And it would be so smooth to take to work and have all of the bells and whistles,
the sunroof and whatever else you think about.
But you want to take a step back and think, oh, is it really worth it
to spend all of this money on a brand new car?
Because most likely you're going to be taking out a loan on that car,
which means you would be paying for the car and the interest on the loan.
Let me share an example of what I'm talking about.
Let's say you buy a brand new car
and the average price for a brand new car right now is forty thousand eight hundred
and fifty seven dollars, which is super high.
But anyway, and then the average car loan
interest rate is five point to seven percent.
So if you were to take out that loan for five years, the total amount you would
pay for that car would be forty six thousand five hundred and sixty five
dollars, which would be seven hundred and seventy six dollars per month.
That would be your monthly payment.
Now, since you've watched this video and you are not going to fall prey to this
money trap, you're going to buy a used car.
Let's say you're OK with getting a hatchback.
You don't need a huge truck right now.
The average price for a hatchback is
thirteen thousand nine hundred and eighty five dollars.
And that is used
if you were to take out a car loan at that five point to seven percent
interest rate, still, the total amount you would pay
for that car over a period of five years would be fifteen thousand nine hundred
and thirty nine dollars, which would mean your monthly payment
would only be two hundred and sixty six dollars per month.
That is a huge difference.
If you take that seven hundred and seventy six dollars minus the two hundred
and sixty six dollars, that gives you an extra five hundred
and ten dollars per month that you would not be putting toward a brand new car.
We're going to talk about investing a little later in the video.
But I want to show you this example right now.
If you were to take that extra five hundred and ten dollars that you would be
paying for a new car and you invested that money just over the period of five
years, the same amount for your car loan, and you received an eight percent interest
on your money that was invested, which is very average for the stock market.
It's very possible.
Then in five years, you would have thirty
eight thousand two hundred and thirty three dollars.
Instead of buying a brand new car for about forty thousand dollars,
you could buy a used car and invest that extra money and then you would have
about forty thousand dollars after the period of five years.
And then you could buy your brand new car if you wanted to.
I'm not saying to do that, but it would be a possibility.
I want you to just think about that for a minute.
That money that you are spending right
now, if you were to invest it, it could grow so much more over time
and then you would have so much more money later on.
OK, let's move to money trap number three.
And this one is not actually knowing where
you are spending your money or where your money is going.
So you actually don't track your money.
You just spend on whatever you want to.
You swipe that credit card and you sign up
for a lot of subscriptions and you have no idea how much money is really coming
in and how much money is going out and where that money is going out to.
This can be really scary because you can
get into a habit of just living paycheck to paycheck, which is very dangerous
because what if you were to have an emergency and then you wouldn't have
any money in your savings account to pay for that emergency.
So you would probably swipe your credit card and get into more and more debt.
We definitely don't want that to happen.
It's important that we are tracking our
money so that we can know where to make adjustments along the way.
And the way that I like to do that is
with a spreadsheet and with a free app called Personal Capital.
You can hook all of your financial institutions to personal capital,
all of your checking, your savings, your credit cards, your mortgage,
if you have a house, a 401k plan, everything that you can think of and then
you can track all of your finances in just one place you can see all
of your bills that have been paid, all of the income that has come in,
or if you missed a payment and got charged a late fee.
You can see all of that and personal capital within about 30 seconds.
You can just open the app and it will refresh all of your accounts.
If you are interested in signing up for personal capital,
I will leave my referral link below and you can get a free twenty dollar
Amazon gift card when you hook one of your retirement accounts to a personal capital.
If you don't like the idea of having an online app, at least do a Google sheet
or a spreadsheet or get out a notebook and write it down,
write down how much you're spending and where you're spending that money so
that you can really see, oh, I'm spending this much on eating out.
I really don't need to be spending that amount.
And then you can make adjustments along the way.
All right. The fourth money trap that a lot of people
fall prey to is leaving a lot of their money in a savings account.
Once you've graduated from college and you
have that career job, you're making a lot more money.
And if you are just leaving it sitting
in your savings account, you are not making your money work for you.
And I was guilty of this.
I had huge amounts in my savings account because I did have a good job and I ended
up purchasing my own place and I had roommates that helped to pay the mortgage.
My expenses were pretty low and I was able
to accumulate a lot of money in savings, but I just left it sitting in savings.
And the thing is, when I first started doing this,
I didn't even have it in an online savings account with a higher interest rate.
So if you do have a lot of money sitting in a savings account,
at least set up an online savings account that has a higher interest rate so
that you can earn a little bit more money on your money.
I knew that I needed to get my money invested.
I was just kind of scared to invest my money.
I didn't really understand how investing
worked and I was afraid of losing all of my money.
Which brings us to money trap number five.
And this one is not really planning
for your future or your retirement in particular.
If you are leaving all of your money sitting in a savings account,
you are not really working toward your retirement or your financial freedom goal.
And I know when you are in your 20s,
maybe even in your 30s, you're not really thinking about retirement.
It seems so far away.
I know it felt that way for me,
but as I got older, I kept thinking about it more and more and I kept thinking,
how am I going to get all this money to be able to retire or become financially free?
And around that time,
I had found the fire movement, financial independence, retire early.
And they were saying how they knew how to calculate exactly how much they would
need for retirement or to become financially free.
And I have a video on how to calculate that.
So I will leave a link above and below
in the description and you can check that out later on.
But it's really important that you start
thinking about that at a young age, because the sooner you start investing
your money, then the more compound interest works for you.
And honestly, I didn't have this mindset.
I thought, oh, I can just spend my money on whatever.
I have enough in savings.
I can go ahead and travel, I can buy clothes.
And I wasn't really intentional about what I was spending my money on.
Once I became more intentional and really focused on becoming financially free,
I reduced my clothing budget and I was able to put.
More toward my Financial Freedom Fund, which included investing in properties,
and it's funny to look back on this now because I still could have lived a great
life and I did live a great life, but I could have spent a lot less money.
I had to have a lot of things.
I would buy a red skirt and then I would buy another red skirt.
And I had a turquoise skirt and I bought
another turquoise skirt and I had plenty of hills, but I would buy more hills.
And it's just all of these things that added up over time.
And now that I think about it,
if I had not spent all of that money or so much of that money on clothing or shoes,
I would have so much more money invested right now.
It makes a huge difference when you are
really intentional about your spending and you really think about your priorities.
And by having a priority of becoming financially free at a young age will make
a huge difference in what you're spending your money on.
And it's not to say you can't spend any of your money on anything fun.
That's not what I'm saying at all.
You still want to enjoy life, but when you're more intentional,
then you're even happier with what you are spending your money on.
Because looking back,
I could care less about a lot of those clothes that I purchased.
In fact, I have donated a ton of clothes
to second hand stores, which I guess they are benefiting someone else.
But if I would have been smart
in the beginning, I never would have made those purchases. Going back to
leaving a large amount of money in your savings account,
let's say you had fifty thousand dollars sitting in your savings account,
maybe earning one percent interest if you're lucky
and you hold it in there for a period of ten years. At the end of that 10 years,
if you are contributing five hundred dollars each month to your savings
account, then you would have one hundred
and eighteen thousand three hundred and thirty one dollars.
Now, here's the opposite of that.
If you were to not leave that money in a savings account and you were
to invest your money and earn at least an eight percent return on your money,
then over the period of ten years you would have two hundred and two
thousand four hundred and fifty five dollars.
So you would have almost doubled your money.
That is crazy to think about if you are willing to put a little bit of effort
into investing and you can keep that very, very simple.
I talk a lot about this on my channel,
so I have a lot of other videos about investing and how to keep it simple.
Then you can double your money,
so don't fall prey to not really thinking about your future and especially about
retirement or becoming financially free, because if you put that off even longer,
then you're not going to be able to retire when you want to.
And that's a scary thought,
because if you still need to work in your retirement years, when you are a lot older
and you're not able to work, then someone else has to take care of you.
So really think about the effects of not
investing your money as soon as possible because it doesn't just affect you.
It will affect those around you.
Those are the five money traps that I wanted to share with you today.
Comment below and tell me if you have
fallen prey to one of those money traps or if it's a different money trap that you've
fallen prey to so that we can learn from one another.
And if you found this video helpful,
please hit that like button and share it with someone else who would like to hear
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Thanks so much for watching.
I'll see you in the next video.