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10 Biggest Money Mistakes to Avoid in Your 20s

10 Biggest Money Mistakes to Avoid in Your 20s

Your twenties are a tumultuous time. From courtship to education, the temptation to shell out hefty sums is constant. Sail into your next decade financially secure by avoiding the biggest money mistakes made by twenty-somethings:

1. Loving, gettin’ down, or marrying in a way not supported by your income.

Whether it’s rounds of $10 drinks, or shelling out thousands for an engagement, modern courtship is expensive. Remember that you are looking for a partner who shares your values, and one that you can build a future with. Futures require money. Instead of expending it on a wedding, put it toward homes, cars, or anything else your long-term vision holds.

2. College “just because.”

Many young people enter their twenties already saddled with student loans, to be carried throughout this decade and perhaps into the next. Before you commit to an expensive educational path, confirm that your desired career field requires it–perhaps a trade school, certificate, or apprenticeship would be equally effective. If you do not yet know what you want to pursue professionally, work for a year and explore that question. Do you want to find out the answer while you’re making a little money, or throwing it away on classes you may not like or need?

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3. Going into debt.

Talk to nearly any financially successful individual in their 40s and 50s, and they will laugh about the days of eating nothing but cheap pasta, hitting up the laundromat, and meeting new friends on the city bus. They had these adventures in their 20s. Now, before you have a family, want to make a career change, or need to buy a house, is the time to pinch pennies. Pinch them hard, and be careful to distinguish between needs and wants–every cent you save will be used in the years to come.

4. Living off credit cards.

What’s a surefire way to end up in spiraling, increasing debt? Living off your credit cards. Limit yourself to one card with cash rewards. Purchase only what you can afford at that moment and pay it off regularly.

5. Borrowing money for cars.

If you’re in your twenties, you don’t need a fancy ride. Period. You definitely don’t need a car note. What you need is a reliable vehicle with great gas mileage. You may not be able to afford a car immediately. Urban areas likely have buses or van pools; rural communities may have ride-sharing boards. Get creative.

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6. Neglecting the future.

We never know what the future holds but, with proper planning, we can prepare for it. Start saving for retirement now, with an eye toward investment options that earn tax breaks, such as contributions to a Roth IRA.

7. Harboring illusions about the present.

An appropriate emergency fund includes sufficient savings to cover up to six months of living expenses should you suddenly lose your job. More is better. What if you lose your job, your car breaks down, and a child needs braces, all in the same week?  Stranger things have happened, so start building up your emergency fund today.

8. Forgoing insurance.

You are not invincible. You can either learn that now, or when you are plunged into debt to pay the ambulance fee and surgical costs from a medical emergency, when the other driver sues you after a car accident, or when struggling to replace personal items after a break-in. Shop around for competitive rates, then budget and properly insure yourself and your property.

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9. Failing to plan.

A good financial plan is absolutely necessary to maximize your income, help you invest smartly, and avoid unnecessary taxes every year. Invest in an annual session with a financial planning professional, hire a good CPA come tax time, or hit the library and study up on your own.

10. Turning to family and friends.

Relationships end when money gets involved, especially if you borrow and are later unable to pay them back. Preserve your friendships and family ties by going to an appropriate source for loans if you do find yourself in need of extra funds–the bank.

Sound like a tall order? Creating a solid financial state is not easy, but with diligence and perseverance, you can use your twenties to build the foundation you dream of.

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Need more specific guidance?  Check out these tips from a professional financial advisor.

Featured photo credit: Jennifer Correa via flickr.com

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Last Updated on March 29, 2021

Life Insurance: A Secure Way To Protect Your Future.

Life Insurance: A Secure Way To Protect Your Future.

Life is a journey full of ups and downs. No one can actually predict what might happen the next moment; there are times where the happiest moments do not even take a second to turn into the gravest. Planning for your future can help you face such unwelcomed but irrepressible situations with much ease. We all want to make every memorable event of our life more special and to cherish all those moments happily and worry less, you must financially plan your future. But no one has control over life and death. Who would wish to see his family suffer in his absence? Insurance hands over the financial jeopardy of life’s happenings to an insurance company.

Importance of getting a life insurance

No one has control over life and death. Nobody would like to see their family suffering in an absence, and that’s why many people recommend life insurance. A life insurance plan is one of the best ways to secure the future of your family, even against those financial troubles after an untimely demise. These plans are safe and credible, and you could trust them for your family’s better future.

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On the other hand, a life insurance policy is a contract between a company (insurance provider) and policyholder in which the insurance provider ensures to pay a certain amount of money to the nominated beneficiary in case of the policyholder’s death during the term of the agreement. There are different types of insurance plans, and it is important for you to know the benefits of those plans such as a funeral, medical or some life expenses provided they are mentioned in the agreement.

Choosing the right insurance plan

If you’re about to select an insurance plan, you should consider some important factors:

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  • The time at which you start investing in a program and the number of family members you want to get insured. Obviously, a married man with two children has different needs compared to a single one. The number of persons who are dependent on an individual also varies from person to person.
  • The next thing you need to consider is you and your family needs. What are your child’s dream, your retirement plans, for how long would your dependents need financial support, any personal injury, etc. And do not forget those events or situations that will surely demand a huge sum of money.
  • The next thing one must consider is your current income. You should preferably choose a plan which you can afford.

Now you must be having a pretty clear idea of how to choose the best plan for you. Further, you should also compare various plans offered by different companies and numerous sites available online that help will you to compare them.

Differences between life insurance plans

Here’s a short brief of some plan categories you can choose according to your needs:

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  • Term Insurance Plan – You have to pay once, and your nominee gets the paid money under your misfortune demise. It ensures a person for a fixed time. If you survive the policy period, you do not get your premiums back.
  • Whole Life Policy – This plan continues for your lifetime. Under this, the policyholder has to pay regular premiums, until their death.
  • Endowment Policy –  In case the individual dies during the tenure, the beneficiary gets the amount assured. If the person survives the policy tenure, they gets back the premiums paid with other investment returns along with several other benefits.
  • Money Back Policy – In this a portion of the money invested is returned to the investor at regular intervals. If you survive the insurance term you get the entire amount back; else the beneficiary receives the entire sum assured.
  • ULIPs – These are the life insurance plans that offer you future security plus wealth creation options.

Many people do not opt for whole life policy and endowment policy because of the high amount of money you need to pay, while others may prefer to opt for these if they have a high life expectancy. Surely you will find the best one for you.

So what are you waiting for? Plan for your future and live a happier and carefree life today.

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Featured photo credit: aryehsampson.com via aryehsampson.com

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