- I just turned 25, which means,
I'm entering my late 20s now, and I feel like
money has always been such a taboo topic to talk about.
But this is exactly the type of video
that I would have loved to see in my early 20s,
or even in my teens to prepare.
So today we're going to talk about
seven Financial or Money Mistakes to avoid in your 20s.
Number one, accumulating credit card debt.
The reason why we're so vulnerable in our 20s
is because a lot of our habits good or bad
form during these years,
and we're also greatly inexperienced.
I feel like it's really difficult
to understand the power of compound interest
in your early formative years because you're just
not really thinking about that.
But if you leave your 20s with a small amount of debt,
you are going to leave in 15 to 20 to 30 years
a way larger debt for you and it will just set you
further and further behind.
So stay away from credit card debt and pay off
all your credit card bills.
The reason why this is even more important
in your 20s during this time is because credit
and buying power accumulate over time.
If you have a bad or sketchy history of credit,
and paying off your bills, it's going to be really hard
to do a down payment on a house even get an apartment.
So it's super important to start having great habits now.
Number two, not saving or having a rainy day fund.
Did you know that actually, most millennials
don't even have $1000 saved in their savings account.
Now I read Dave Ramsey's book,
"In The Beginning of My Financial Journey."
And this is a good jumping point,
if you've never like delved into finance
or anything like this it's such an easy read.
But his plan basically says that you should have
$1000 saved at all times in your savings
and that's his rainy day fund.
But other financial experts actually recommend
having up to three months of salary saved away,
because you never know when your car might break down.
You might need your AC fixed, just from random situations
that life throws at you and you just want
to be prepared for that and not have to go into debt
or use your credit card irresponsibly.
Personally for me, I don't find saving very difficult.
Majority of my income goes already into saving.
But if you're terrible at saving, I would actually recommend
using apps like Digit.
So I actually started using Digit when I first
graduated college and began my financial journey
and learning about money because it was a free app.
But I do believe now you do have to pay for it.
And this is not sponsored whatsoever.
But it's an app that basically helps you pay off debt
and automatically puts away money for you to save.
And you obviously can do this without an app,
you can put 10% away of your monthly income,
maybe 20% the next month, and just keep going
until you have a rainy day fund,
but you do not touch this rainy day fund
for anything other than a rainy day.
Number three, not saving for retirement as soon as you can.
I think that a lot of us are just beginning our careers
and we're thinking about our first day,
but on that first day, it's important to also start thinking
about your last day of your career.
You want the option to retire if you can, even if you end up
working your entire life, you want the option to retire
and the most powerful investment tool in your 20s
is actually time, Albert Einstein called
the power of compound interest,
the eighth wonder of the world.
The sooner you start squirreling away money
into a 401K account or any other retirement account,
the longer the money has to accumulate interest
and build into healthy fund that will see through old age.
Just to illustrate with a really quick example,
say at age 20, you start putting away $100 a week
and to a 401K account, we're earning an average return
of maybe 8%, you, by the time you hit age 65,
you will get $1.86 million.
But if you start doing this from age 30,
meaning you missed 10 years,
you will have accumulated $827000.
And so what that simply that's pretty much
a $1000000 difference.
I feel like as soon as you get hired by a company,
it's a good idea to go to HR and find out
what the 401K plan looks like.
Will, they match your contributions?
Does the company have a pension plan?
And if so, what are the requirements
to become fully vested?
A salary advice is to save 10 to 15% of your income
straight for retirement.
Number four not investing.
Like I said, the power of compound interest
is totally not even fathomable in our 20s.
But the biggest thing that we have on our side
is our time in our 20s.
And I would suggest investing, I heard this quote that says,
"Stupid people save and smart people invest."
If you're new to investing like I am,
I would highly recommend using the Stash app.
If you're investing under $5000 you only pay $1 monthly fee.
And I like, what I like about Stash
is that it's very uncomplicated.
What I like about Stash is it's good for beginners
and it's an uncomplicated way to start investing.
You choose from a set of simple portfolios
reflecting your interests, your beliefs, and your goals
and it does the rest, again, this is not sponsored.
Number five, leasing a car or purchasing
or having a car payment that far exceeds
what you can afford.
Now cars are what we call depreciating assets,
meaning that the moment that you roll your car
off the it depreciates in money and what we want to have
is appreciative assets, which means that they go up in time
in values, I would highly suggest buying an affordable car
which you can pay in cash or having a car payment
that is 10% of your monthly income.
If it exceeds any more than that, for example,
if you're making $4000 a month, your car payment
should not exceed over $400.
I would highly recommend buying an affordable car
that you know is not going to be pushing your budget
and eating up all your money at the end of the month.
And also if you can, buying a used car
maybe two, three years old because they work just as fine
but the amount of money that you save
in buying an affordable used car is insane
and totally worth it.
I drive a Hyundai Elantra which I have no payments on
and I love her, I personally will take a large sum of money
over how I'm perceived to my peers or society any day
as long as my car is safe and running and it gets me
from place A to B without having to stress me out
every single month, I am doing very well.
Number six, not saving for property.
I think that a really healthy and reasonable goal
is to save money for a house or maybe a condo
in the long run when you enter your 30s.
There are a number of reasons why buying house is great.
Tax reductions, equity appreciation and borrowing power
just to name a few.
In your 20s it's easy to get lost in just renting
like nice apartments, luxury apartments,
but at the end of the day, that money
is really going down the drain, it's not going
towards an asset, it's actually just money
that's just spent and that you're never going to see again.
So the goal in your 20s should be
starting to set up yourself to maybe own a property
not maybe in your 30s maybe in your 40s whenever that may be
because there are so many benefits to owning a house
and that it offers so much stability.
Number seven not getting insurance.
You are not invincible, though in your 20s,
your health and your time might have you believing
that to be true, but it's nice getting life insurance,
renter's insurance, health insurance, you never know
what's gonna happen to you and it's also required in America
that you have to have health insurance.
But hospital bills can obviously add up.
I also found out recently, my friend,
her car got broken into and her laptop and her camera gear
all got stolen, but her renter's insurance actually covered
the costs and she was able to get her laptop, her camera,
everything back with renters insurance.
If you don't know much about renters insurance,
I would highly suggest using the app Lemonade.
It is super simple and very easy to use and it's only like,
I think five or $6 a month, and it covers up to $10000
or maybe $100000, I'm not too sure.
I honestly didn't check that but you can go check it out.
There are different plans, that's the one that I use
and have been using because it's just very simple and easy.
And it's always important to have insurance
because you never know what's going to happen to you
at any given moment and it's always just good
to be prepared (sighs).
That is it.
Those are my seven financial or money mistakes
to avoid in your 20s.
Hopefully this helped you out it was very basic
and just a very easy way to get started
and to get the conversation really going about money.
If you liked this video, please give it a like,
it would help me out a lot and just make my day
and subscribe if you would like.
I do a lot of self development and beauty and fashion
and all of that.
So I'll see you guys in my next top.
I'll see you guys on the next one.
Bye (chuckles).
(hands clapping)