We all make mistakes. We usually make even more mistakes when we’re in our 20s compared to when we’re older and wiser. That doesn’t mean you should just shrug it off though. Knowing about these mistakes could help you not make the same ones. Here’s the top 3 money mistakes you need to avoid in your 20s.
1- Relying on Credit cards
In your 20s a credit card might seem like an ATM machine. Something you can just charge willy nilly without much thought. You have to be careful with credit cards though. You don’t want to be depending on them to pay the bills. You especially don’t want to be living above your means, and a credit card can entice you to do that.
Being able to take care of your credit card expenses and managing your credit correctly is actually a good thing for you to do while you’re young. However, if you can’t learn how to use credit cards correctly then maybe you shouldn’t be using them at all.
You need to use your credit card as way to build your credit and be responsible about using it. You should also be paying off your credit card in full each month. Don’t get yourself trapped into the minimum payments schedule, that’s a recipe for disaster. You’re wasting way too much money is interest that way, and it’s going to be hard to get out of that habit.
Instead, you should take advantage of credit card cashbacks and deals you can go after. Use your credit cards as a way of keeping your budget in check. I use it as a way to go back and look at what I’ve purchased during the month. It makes it much easier to budget for things in the future.
2- Holding off on retirement savings
This is by far one of the worst things you can do in your 20s. The earlier you can start saving for retirement the easier it’s going to be for you to retire sooner. It can be hard to think about retirement when you’re a 20 something, but you really need to not think about it and just save.
The compounding interest that you’d get over the years is just unmatched when you look at the long run. What you save in your 20s is going to like saving 10 times that amount or more during your late years of working. It’s just smarter to start earlier. You’ll gain good saving habits and you’ll take advantage of the one thing that we can’t get more of… time.
You should start by at least taking advantage of your 401K (or ROTH 401K) at work. Make sure you at least save enough to match what your employer your match. The more you can save the better. Get that money in early and you’ll be glad you did later in life.
3- Letting others worry about taking care of your money
You might think that that smartest thing you can do is to just find a job and then hire someone to take care of your money. This approach might be better than doing nothing, but you really need to learn about your own finances and figure out what you need to do yourself.
Think about it, who really cares about your money like you do? The answer is nobody. This is truly an example of if you want something done right then you better do it yourself.
Now, this doesn’t mean that you shouldn’t seek help in the process. Actually quite the opposite, I think you should most definitely seek advice. But don’t just blindly take any advice without doing some more of your own due diligence.
Remember this, the people that work in finance are working to make a living so whatever they tell you might not always be in your best interest. It could be that they’re just looking out for their best interest. That isn’t the case with all of them, but you should always ask questions and seek answers when it comes to your money. You worked hard to earn it so you should work even harder to make sure your money is going to work hard for you. Don’t just assume someone else will make sure it works hard to earn for you.
The best way I found to do that is to just educate yourself and read about different peoples situations and solutions. Talk to your friends and family, talk to your coworkers, and talk to your financial advisers. Talk to anyone you trust to get information from. Then take all that information and research it some more online and at your local library. Do a little work and figure it out. It’s worth spending time on it, trust me.
The good news about all of this is if you’re making these mistakes while you’re in your 20s then you still have tons of time to get things back in order. Just work on getting everything fixed as soon as possible so you can start taking advantage of all that time you have left before retirement. Make yourself responsible for your money because nobody else really is anyway.