Advertising
Advertising

10 Common Money Mistakes People Wish They Realized In Their 20s

10 Common Money Mistakes People Wish They Realized In Their 20s

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.

Advertising

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.

Advertising

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.

Advertising

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.

Advertising

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

More by this author

Amy Johnson

Amy is a writer who blogs about relationships and lifestyle advice.

If You Feel Trapped, Do These 9 Things To Take Your Life Back If You Feel Trapped, Do These 9 Things To Take Your Life Back This List of 50 Low-cost Hobbies Will Excite You Daily Routine of Successful People That Will Inspire You to Achieve More 15 Inspirational Weekend Activities to do by Yourself 15 Amazing Design Ideas For Your Small Living Room

Trending in Money

1 How to Use Credit Cards While Staying Out of Debt 2 How to Use Debt Snowball to Get out from a Financial Avalanche 3 How Personal Finance Software Helps You Get More Out of Your Money 4 The Best Ways to Save Money Even Impulsive Spenders Can Get Behind 5 How to Answer the Tough Question: What are Your Salary Requirements?

Read Next

Advertising
Advertising
Advertising

Last Updated on March 4, 2019

How to Use Credit Cards While Staying Out of Debt

How to Use Credit Cards While Staying Out of Debt

Many people will suggest that the best thing to do with your credit cards during these tough economic times is to cut them up with a pair of scissors. Indeed, if you are already in huge debt, you probably should stop using them and begin a payback strategy immediately. However, if you are not currently in trouble with your credit cards, there are wise ways to use them.

I happen to really love my credit cards so I will share with you my approach to how I use mine without getting into deep financial trouble.

Ever since about 1983 when I got my first Visa card, I continue to charge as many of my purchases as possible on credit. Everything from gas, groceries and monthly payments for services like my cable and home security monitoring are charged on credit. Despite my heavy usage, I have maintained the joy of never paying any interest fees at all on any of my credit cards.

Advertising

Here are some tips on how best to use your credit cards without falling into the trap of paying those nasty double-digit interest fees.

Do Not Treat Credit Cards as Your Funding Sources

Too many people treat their credit cards as funding sources for major purchases. Do not do this if you want to stay out of trouble. I use my credit cards as convenient financial instruments so I do not have to carry around much cash. In fact, I hate carrying cash, especially coins. When you buy things on credit, the purchases are clean and you will not get annoying coins back as change.

I do not rely on my Visa, MasterCard or American Express to fund any of my purchases, large or small. This brings me to my golden rule when it comes to whether I will pull out any of my credit cards either at a retail or online store.

Advertising

I never purchase anything with my credit cards if I do not have the actual cash on hand in my bank account.

If I really cannot pay for the item or service with cash that I already have at the bank, then I simply will not make the purchase. Remember, my credit cards are not used as funding sources. They are just convenient alternatives to actual cash in my pocket.

Make Sure to Always Pay Off Balances in Full Each Month

The next very important part of my overall strategy is to make absolutely sure that I pay the balances in full each and every month no matter how large they are. This should never be a problem if the cash has been budgeted for my purchases and secured in the bank. I have always paid my full balances each month ever since my very first credit card and this is why I never pay interest charges.

Advertising

Using Credit Cards with Rewards

Most of my credit cards are of the “no annual fees” type, including one MasterCard on a separate account I keep at home as a spare in case I lose my wallet or incur any fraudulent charges. However, I do use a main Visa card which does have an annual fee because all purchases on that card reward me with airline frequent flyer points. For me, the annual fee is worth it since I do travel and I get enough points to redeem many free flights.

You have to decide for yourself if you will charge enough purchases on credit each year without paying interest charges to warrant a credit card that rewards you with airline points (or other rewards). In my case, the answer is “yes” but that might not be the case for you.

I occasionally use a MasterCard or American Express card on small purchases just to keep those accounts active. Also, I have been to the odd retailer that accepted only a certain type of credit card, so I find that having one from each major company is quite handy. Aside from my main Visa card which earns the airline points, the rest of my cards are of the “no annual fees” variety.

Advertising

So this is how I use my credit cards without getting into any financial trouble with them. This strategy is recommended only if you are not in debt, of course. In fact, it is worth keeping in mind once you’re out of debt so that you can keep your credit cards active and treat them responsibly.

What are your credit card usage strategies? Let me know in the comments — I’d love to hear what methods you use.

Featured photo credit: Artem Bali via unsplash.com

Read Next