When it comes to money, we’ve all made mistakes. Some of these mistakes, often committed during your 20s, are tolerable. However, there are also bad financial decisions that have lingering effects for decades.
Here are some money mistakes you can’t afford to make in your 20s.
Not Starting To Save For Retirement Early Enough
Once you get your first job, all you can think of is what you can buy or what your next travel destination will be. While it’s not bad to reward yourself, this is also the best time to get into the habit of saving.
Compulsive spending is one of the most common mistakes people in their 20s make. They think they have time to save for retirement later on in life and that they will just catch up.
The problem with this thinking is that it’s very difficult to catch up if you don’t start saving early enough. If you want to retire comfortably, you need to start saving as early as possible.
Not Investing In Yourself Or Your Education
What you do today is in preparation for the future. Investing in yourself is your health. For example, getting a yearly physical or taking a daily walk. It could also be as simple as putting down some of the junk food for healthier options.
You should also be investing in your education. This is one of the best things you can do for your future. It’s never too late to learn new things and to better yourself. However, many people in their 20s don’t think about this. They think that they can just coast by on what they already know.
This is a huge mistake. The world is constantly changing and you need to change with it. If you don’t invest in yourself, you will become outdated and your skills will become obsolete. Even if you’re already out of college, you can stay sharp by using online learning such as Coursera or Udemy.
Not Having An Emergency Fund
An emergency fund is something that everyone should have, but many people in their 20s don’t. They think that they don’t need one because nothing bad will happen to them.
The truth is, bad things can happen to anyone at any time. You could get into a car accident, you could lose your job, or you could get critically ill. If you don’t have an emergency fund, you’ll be in a world of hurt when something bad does happen. Many 20-somethings don’t even have $500 in the bank for emergencies and most emergencies are under $500.
An emergency fund should have enough money to cover your expenses for at least three months. This will help you tide over until you can get back on your feet.
Not Building Good Credit
According to Forbes.com, the average credit score for 18-23 years old is 667. Your credit score is one of the most important numbers in your life. It will determine whether or not you can get a loan, how much interest you’ll pay on a loan, and it can even affect your insurance rates.
Many people in their 20s don’t think about their credit score because they’re not looking to take out a loan. However, your credit score is important even if you’re not looking to borrow money.
There are many ways to build good credit. One way is to use a credit card and make sure to pay off the balance in full every month. Another way is to get a secured credit card. This is a credit card where you put down a deposit and that deposit is your credit limit.
If you use either of these methods to build good credit, you’ll be in good shape when you need to take out a loan later on in life.
Spending Too Much Money Going Out And Taking Vacations
Who doesn’t like to go out for a night on the town or even better an exciting vacation? In your 20s, it’s easy to fall into the trap of spending too much money going out and taking vacations. It’s important to enjoy your life and have fun, but you need to be smart about it.
If you’re constantly going out and spending money on nights out or vacations, you’ll never have any real savings. It’s important to find a balance between enjoying your life and being smart with your money.
One way to do this is to take advantage of free events in your city. There are always free concerts, festivals, and other events happening. You can also take vacations that are less expensive by traveling during the off-season or Couchsurfing.
These are just some of the financial mistakes you can’t afford to make in your 20s. It’s important to be aware of them so you can be better prepared for your future.
What other money mistakes do you think people in their 20s make? Let us know in the comments below!
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Tamila McDonald is a U.S. Army veteran with 20 years of service, including five years as a military financial advisor. After retiring from the Army, she spent eight years as an AFCPE-certified personal financial advisor for wounded warriors and their families. Now she writes about personal finance and benefits programs for numerous financial websites.
