Your 20s are tough enough without having money woes. Financial issues in your 20s tend to follow you into your 30s making for a very miserable experience. If you’re still in your 20s, here are 6 mistakes to avoid:
1. Living Beyond Your Means
Listen. I get it. YOLO or whatever the kids are saying now. Why shouldn’t you enjoy your life? (Answer: You absolutely SHOULD! Within reason). Create a budget and stick to it. And I know that budgeting doesn’t sound very appealing but when done properly a budget should include fun stuff like nights out or saving for that new handbag. The key is to ensure that you’re able to enjoy yourself without overspending.
2. Not Having an Emergency Fund
You might not think much of not having an emergency fund but this is one of those things where you only know you need it when you don’t have it. I wish I had put more of an effort into building an emergency fund in my early 20s because there were several instances where I had to dip into my retirement savings for unexpected expenses. Also part of me wonders if maybe I would have had enough to retire if I hadn’t dipped into my retirement fund so often (illogical? Maybe, but let me dream). A decent emergency fund should be enough for 3 to 6 months of expenses (Also, a bonus is that when you have this money you don’t need to stress as much in a toxic job. If you want to leave, you know you DO have a back-up plan).
3. Not Saving for Retirement
Yes when you’re 21 retirement seems like ages away but you have the advantage of time. By saving a small amount now, you get into the habit of saving AND you get the added advantage of compound interest. It may not be as exciting as that concert ticket you’re eyeing, but future you will appreciate the financial peace of mind it brings.
4. Buying a Car You Can’t Afford
Ah, that new car. It’s shiny, it’s sleek, and it’s… way out of your financial league. Having reliable transportation is important, but buying a car beyond your means can put a serious strain on your budget. Do your research beforehand, set a budget, and consider buying a used car instead. Remember a car loses it’s value over time so it’s less of a loss to you if you skip buying brand-new.
5. Ignoring/Not Building Your Credit Score
It’s easy to ignore your credit score but here’s the thing- having a good credit score can open doors for future loans, cellphone contracts and so much more. So, get familiar with your credit score and take steps to build it up. Credit cards can be your BFF here, just use them responsibly! Start with a low limit, make small purchases, and make sure to pay off your balance in full each month. (That last bit is VERY important).
6. Going Into Debt for Items You Don’t Need
Debt is an unavoidable part of life. But when it comes to things that are not a necessity, think twice. Yes you NEED new shoes but can an existing pair not do the job until you have the cash? If you swipe your credit card now, will you be able to pay off the balance by the end of the month? Another thing that might be worth the debt is a course that could lead to a better paying job. But imagine having to go into debt for shoes AND a course? These things add up quickly.
By building good habits now you’re going to have an easier time when your 30s hit and you’ll be surprised at how much easier it will be to manage your increased income.
