Do you want to be financially secure? Many young adults in their 20s make money mistakes through lack of knowledge, which can result in debt and financial insecurity.
It is important to get on top of your finances now – check out 10 common money mistakes people wish they realized in their 20s.
1. Spending to make themselves feel happy
Many young adults who spend too much money do so because it temporarily helps them to feel good, but mixing money and feelings can be dangerous.
Avoid going shopping if you’re having a bad day – the temporary fix from emotional spending will pass quickly, but actually saving will leave you happier and more fulfilled in the long-term.
2. Not having emergency savings
When you’re in your twenties, having enough money in your bank to pay rent and buy food and a few drinks can feel like more than enough.
However, planning for an emergency could really help you later down the line – and if there isn’t an emergency later on, you will have savings for a car, or a little to help with the deposit on a house. Try to have 6 months of living expenses saved up as a safety net for the future.
3. Choosing not to make investments
Investing may seem boring and confusing, but it can really benefit your finances. If you do decide to make investments, ask professionals for information and advice.
A bad investment is a waste of money, but once you have some tips and knowledge behind you, you could make an investment that changes your life financially.
4. Being frugal and failing
Often young adults in bad financial situations commit themselves 100% to getting out of debt and saving up, leaving no money for anything extra. This can get very dull very quickly, and can actually result in binges of high spending.
This is no way to live; instead, factor in a small amount of weekly money for fun. Make sure it is a small amount, but you can spend it on whatever you want. This is more likely to help you to save and pay off debt, as you are far less likely to binge spend your money.
5. Moving out too soon
After a whole life of living at home, many young adults can’t wait to move out and get their own place. While this is fine for many people, it is worth considering staying at home for a little longer as it is a great opportunity to save lots of money.
Ask yourself; do I need to leave immediately, or could I leave in 3 months? How much money do I want to save up before I move out?
6. Not setting long term financial goals
Most people in their twenties have short term financial goals, like paying their rent and bills. However, if you can afford to set short term financial goals, it is likely you can afford to set long term ones too. Decide how much you want to save in a year, and start working towards that.
One day, you may want to start a business or buy a house – setting long term financial goals will make these things possible.
7. Ignoring their employment benefits
If you work in a company, you are probably making small monthly payments towards retirement and healthcare. Many younger people see this as a necessary evil, but it is much more beneficial to you than the company you work for.
Take some time to look at the terms and agreements surrounding these monthly payments, and see if you could alter your payments to take advantage of any extra financial benefits.
8. Staying in credit card debt
Credit card debt is one of the biggest financial issues for young adults, with interest rates averaging around 16%. If you choose to make the minimum monthly payment, you may be paying off your cards well into your thirties, when you will have other expenses that need paying.
It is difficult to save with debt, and even more so if there is interest too, so try to focus on paying off your credit card debt as soon as possible.
9. Choosing money over growth
Many young people take job offers with a good wage, turning down positions with a lower income but much more opportunity for growth.
It is important to choose growth over money; these learning opportunities and chances for promotion are invaluable, and it is likely you will end up with a much better wage than the first job after a short amount of time.
10. Spending too much on unnecessary extras
The new iPhone or expensive hair extensions; can you really afford these costs on your current budget? It is important to treat yourself to things you love, but it is also important to sit down and work out if your outgoing expenses are too high.
Before you buy a high-end, luxury product, ask yourself these questions; can I really afford this? Do I need this? Why do I want it?
Featured photo credit: xvire1969 via flickr.com