10 Money Mistakes you must avoid during your 20s to secure your financial future

 

Your 20s are your best years because of the energy levels and time that you have. But you should use this opportunity to organize your finances. They are the years when you will be completing college, starting a career or family. Important money habits that can kick-start your goals in the short and long-term should be developed during this period.
The bad money habits in your 20s will trickle into your 30s, 40s and even beyond your 50s. In case you will be clocking 30 soon, here are the 9 financial habits that you should seek to avoid.

1. Accumulating debt

Debt can prevent you from doing numerous things with the money you have. High-interest debt is associated with the loss of a lot of money because of payments made towards interest. So, it is better for you to pay for debt the soonest you can. Try paying your student loan during your 20s in order not to become worried and frustrated in your 30s.
As you pay off these debts, also ensure that you do not accumulate more debts because of lifestyle inflation. You can use credit cards to build credit card. But ensure that it you will use a credit card, maintain your total use below 30% of your limit always. Also ensure that you settle your bills each month to avoid debts.

2. Not having an emergency fund

Anyone can experience an emergency at any age. Such unforeseen circumstances could range from the loss of a job to a car-maintenance bill. The lack of an emergency fund could make you prone to debt and give you peace of mind during stressful situations. According to financial experts, you need to save at least three months in advance worth of your salary. As you save, ensure that you include the emergency fund into your budget. Related to the mistake of emergency fund is the failure to budget for things. Lacking a sound budget leads to overspending or spending on unnecessary items.
You will grapple with unexpected expenses as you get into your thirties. So it’s best for you to anticipate unexpected costs by having an emergency fund.
Unexpected expenses will pop up more and more as you get older and busier. It’s best to prepare yourself for unexpected costs by creating an emergency fund.

3. Not saving for retirement

Many 20-year olds think that they are too young to begin saving for retirement. However, this is a mistake because you could begin putting money aside for your retirement at any age, but the best time to begin is when you are young. When you begin saving while still younger, you will have more time to expand your compound interest and save for retirement.
One of the ways you can use to begin saving for retirement is through contribution to 401(k) plan, particularly if they can match your contributions. It is free money added to your savings account. If you cannot access a 401(k), you could also open an individual retirement account, IRA. You should have an objective of maximizing your retirement account annually.

4. Not being insured

It is a costly mistake to bypass insurance. You may think that you do not require it, but it could be beneficial in case of an accident that places you in a financial bind. Medical and auto insurance are quite important. Also, if you are renting or owning a home, you could consider insurance for homeowners or renters as a safeguard for your belongings.

5. Living beyond your means

This simply entails spending a higher amount of money than the amount you make. If you live within your means every month, you are on your ways to building wealth. However, we often feel that we are depriving ourselves in case we have to do without what we think all people are having. Spending beyond your means is unsustainable because you will soon see bills begin piling up. Appreciate and be happy with what you can afford. Therefore, your 20s should not be characterized by spending extravagantly. Simply spend less and you will become financially free instead of trying to keep up with the Joneses or engaging in what Robert Kiyosaki in his book Rich Dad Poor Dad calls a rat race.

6. Not having financial goals

Financial security and wealth creation isn’t a magical thing; it takes a lot of your effort and time. Similar to anything else, the lack of a plan means you just wing it. So avoid the mistake of not having financial goals and create some to keep you focused. In case you desire to pay debt, put money away for a car, or save for retirement, you will have to figure out how to make it happen.

7. Careless spending

One of the silent money rules that the rich will not tell you is that you should occasionally be selfish with your money. And your 20s are the best years to avoid the mistake of careless spending by only opting for valuable things. You may want to begin traveling before marriage or engage in other endeavors after having a kid. In case you like something and it’s a source of happiness, it’s not a must for you to remove it from your budget provided you can afford it.

8. Living in Financial lies/denial

Your 20s may be characterized by lying to yourself that you are okay with your bank account’s state. Do you ever refrain from looking at your financial statements? Do you develop that feeling that the future will take care of itself?
We at times in our 20s believe that things will get better after a job or salary raise. However, these financial lies only hide the reality of our financial habits. You should honestly assess your finances and develop on that.

9. Allowing campus expenditure to skyrocket to unmanageable levels

College debts are among the most disturbing issues during the 20s. Apart from these debts, student loans could balloon out of control but will have to be paid. Remember that whatever you may take out in the form of student needs has to be repaid with perhaps significant amount of interest. Borrow less and you will repay less later.

10. Not taking advantage of your free time to earn extra money.

And finally, not taking advantage of the free time that is available in your 20s could be one of the costliest mistakes that you make. It is the time when we are full of energy and have sufficient time. Time and energy are previous resources that we should seek to use to begin securing our financial future. You could make some income from a side hustle, or adopt an idea that could be a source of income for you. Check out this if you find the idea of a slide hustle lucrative for you. 50 Ideas for a Lucrative Side Hustle