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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 January 21, 2020

How to Develop a Millionaire Mindset in 6 Simple Steps

How to Develop a Millionaire Mindset in 6 Simple Steps

We all like to dream about being financially wealthy. For most people though, it remains a dream and nothing more. Why is that?

It’s because most people don’t set their mind to achieving that goal. They might not be happy in their current situation but they’re comfortable – and comfort is one of the biggest enemies of growth.

How do you go about developing that millionaire mindset? By following these simple steps:

1. Focus On What You Want – And Take It!

So many people are too timid to admit they want something and go for it. When there is something that you want to accomplish don’t think “I could never actually do that”, think “I could do that and I WILL do that”.

Millionaires play to win, not to avoid defeat.

This doesn’t mean to have to become a selfish jerk. What it means is becoming more assertive and honest with yourself. You don’t have to grab off other people. There is a big pot of unclaimed gold in the middle of the table — why shouldn’t you be the one to claim it? You deserve it!

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2. Become Goal-Orientated

It’s almost impossible to achieve anything if you don’t set firm goals. Only lottery winners become millionaires overnight. By setting yourself attainable goals, you will get there eventually. Don’t try to get rich quickly — get rich slowly.

Let’s take the idea of making your first million dollars and expand on what kind of goals you might set to get there. Let’s also say you’re starting at a break-even position – you’re making enough to get by with a few luxuries, but nothing more.

Your goal for the first year can be having $10,000 in the bank within a year. It won’t be easy but it is doable. Next, you need to figure out the steps you need to take to achieve that goal.

Always look at ways to make growth before cutbacks. With that in mind, you might want to see if you can negotiate a pay rise with your boss, or if there’s another job out there that will pay better. You might be comfortable in your old job but remember, comfort stunts growth.

You may also have other skills outside of your workplace that you can monetize to boost your bank balance. Maybe you can design websites for people, at a fee of course, or make alterations to clothes.

If this is still not enough to make the money you need to save $10,000 in a year, then it’s time to look at cutbacks. Do you have a bunch of old junk that someone else might love? Sell it! Do you really need to spend $10 on your lunch everyday when you could make your own for a fraction of the cost?

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If you are to become a millionaire, you need to start accumulating money.

Here’re some tips to help you: How to Become Goal Oriented and Achieve More in Life

3. Don’t Spend Your Money – Invest It

The reason you need to accumulate money is for step three. Millionaires tend to be frugal people, and that’s because they know the true value of money is in investing. Being your own boss goes hand-in-hand with becoming a millionaire. You’ll want to quit your regular job at some point.

Stop working for your money and make your money work for you.

Rather than buying yourself a new iPad, that $500 could be used to invest in the stock market. Find the right shares (more on that later), and that money could easily double within a year.

There’s not just the stock market — there’s also property, and your own education.

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4. Never Stop Learning

The best thing you can invest in is yourself.

Once most people leave the education system, they think their learning days are over. Well theirs might be, but yours shouldn’t be. Successful people continually learn and adapt.

Billionaire Warren Buffet estimates that he read at least 100 books on investing before he turned twenty. Most people never read another book after they’ve left school. Who would you rather be?

Learn everything you can about how economics works, how the stocks markets work, how they trend.

Learn new skills. If you have an interest in it, learn everything you can about it. You’d be surprised at how often, seemingly useless skills, can become extremely useful in the right situation.

Start developing the habit of learning continuously: How to Create a Habit of Continuous Learning for a Better You

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5. Think Big

While I advise to start off with small goals, you absolutely should have a big goal in mind. If you have a business idea, then that is your ultimate goal – to start that business and make a success of it. If you want to invest your way to millions of dollars and do little work other than research, then that is your big goal.

There is no shame in not achieving a big goal. If you run a business and aim to make $1 million profit in a year and “only” make $200,000, then you’re still significantly ahead of most people.

Aim for the stars, if you fail you’ll still be over the moon.

6. Enjoy the Attention

To be successful, you have to be willing to promote yourself and enjoy the attention to a certain extent. Now the attention doesn’t need to be on yourself, it could be on your brand, but attention definitely attracts money.

Never be embarrassed to get your name out there. That means finding a spotlight and being brave enough to step right up underneath it.

If you run a business, try contacting the local papers. You’d be surprised at how amenable they often are to running a story about you and your business, and it’s all free publicity.

Above all, remember: You control your own destiny. Push hard enough for anything and you’ll get it.

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Featured photo credit: Austin Distel via unsplash.com

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