FINANCIAL MISTAKES TO AVOID DURING YOUR TWENTIES
April 12, 2018
We all love money- or better yet, how easy it makes our lives, but at the same time, we might not always have a hang on it.
Your 20s are definitely the best time to get a hang on your finances and start planning for the future, this is the time where you"officially" become an adult but might still have fewer bills than the average "grown-up" (like your parents).
Just like your 20s are the time to get a hang on your finances, this is also the time when you're most likely making the most financial mistakes- you know, fewer responsibilities, perhaps more money coming your way or simply not enough information on what you should be doing. Which equals one thing: FINANCIAL MISTAKES YOU WILL REGRET.
Whether you have no idea how to get a hang on your finances or already started to plan for a raining day, mistakes are meant to happen, and keeping your finances on track can be tricky. Here are the top five financial mistakes you should avoid during your twenties.
5 Financial Mistakes To Avoid in Your Twenties
1. Credit Cards
Oh, the famous credit cards- if there is one thing I've heard over and over are horror stories of how credit cards have ruined someone's credit, savings, and life altogether. Credit cards are tricky and if you don't know how they work and how to use them, they will be the first financial mistake you will make and regret.Before applying for a credit card ask yourself these questions;
- Do I really need a credit card?
- Why do I need a credit card?
- Will I be able to pay my credit card bills?
- Do I need x as a maximum on my credit card?
- How do this company and this credit card work?
Don't make the mistake of just getting a credit card because you think you'll need one, or because you believe is "free money".
NEWS FLASH... It's NOT.
Everything you used will have to be paid, and if you're unable to make the payments your credit score will begin to suffer... drastically.
Credit cards are great to create credit, but also great to ruin them. If you do end up getting a credit card, be smart about how you use it. Remember... If you wouldn't pay for that with your own money, don't pay for it with a credit card.
A better option is secured credit cards- if you want to build credit a secured credit card might be the best route for you in your early 20s.
TIP: Push off getting a credit card for the later years or until you actually need it. Avoid the credit card bills and the danger of messing up your credit score.
I'm not saying to not enjoy life, but spending more money than what you have or will ever have within the next couple of months to a year will leave your broke and depressed before you know it.
If you don't need the object and don't have the money on hand- learn to say no and walk away from it.
Many go broke trying to do too much too soon, or too much without the right funds and end up realizing all they did was drive themselves into bankruptcy by the age of 25. Don't be this person.
Avoid credit cards to try to keep up with a life you really don't need and definitely can't afford at the moment.
Avoid unnecessary spending, and learn to make sacrifices.
Your credit score is not something that starts off good and takes zero to nothing to maintain, in fact, your credit score needs to be built up and it requires hard work and discipline to maintain it.
The earlier you start working towards your credit, the better it is for you.
Late payments, skipping payments, and collections are some of the main factors that affect your credit score. Keep this in mind when you're falling behind on your next bill.
TIP: Credit Karma is a good and free app that lets you check your credit score as often as you want.
It's a myth, checking your credit score with this app DOES NOT LOWER IT.
"Soft Pulls" does not lower your credit, and there are different places that you are able to pull your credit score at least once a year without affecting it.
Keep in mind: Credit Karma does not reflect your actual credit. The credit this app uses it's an estimation. Expect your actual credit to be 20-50 points lower than what credit karma shows.
Not having a backup plan to fall on if you lose your job or in case of an emergency is the first thing you want to avoid.
Open a savings account and start making contributions to it as soon as possible. It's recommended to save at least 20%-25% of your paycheck.
If you're still a college student- start by putting aside at least $20-$50 into your savings account, this will give you something to fall on in case unexpected expenses come your way.
TIP: It's recommended to have in your savings at least the equivalent of what you get paid/spend on an average of three to six months. This will provide financial stability until you find another job or solve the emergency.
There are different types of savings accounts, they differ between interest rates, find out with your bank which one of their account options will help meet your current needs, and help achieve your savings goals.
You Should Also Read: How to Save $1K in A Month
Aside from the paid vacations and sick days or personal days, the most important benefit that a job can offer is a 401k or anything along the lines that will help you start your retirement plan.
One of the reasons people don't take advantage of their benefits its because they don't know what it is or how much it benefits them.
Aside from your employer's contributions the best thing you can do it's to contribute to your 401k as much as you can. All of your contributions are before taxes and before you even see your paycheck- so, in reality, you can't miss money you don't even see.
TIP: Look into your job's benefits during the hiring process and see if they are something you like and/or actually benefit you.
Start contributing to your 401k from the very beginning (or as soon as you can) if you see an amount of money from the very beginning of your check, you won't miss the money that went into your 401k.
Talking about our finances and money situation can be a tricky and sticky subject, but it's one that must be talked about and dealt with.
The sooner you realize the mistakes you're making and start taking control over your finances, the better it will be for you and your future. (click to tweet)
Remember ...
But remember to ...
TIP: Push off getting a credit card for the later years or until you actually need it. Avoid the credit card bills and the danger of messing up your credit score.
2. Living Above Your Needs
Not everyone is able to move back home after college or live rent-free for most of their twenties, but one thing you can do is learn to live with what you need vs what you want.I'm not saying to not enjoy life, but spending more money than what you have or will ever have within the next couple of months to a year will leave your broke and depressed before you know it.
If you don't need the object and don't have the money on hand- learn to say no and walk away from it.
Many go broke trying to do too much too soon, or too much without the right funds and end up realizing all they did was drive themselves into bankruptcy by the age of 25. Don't be this person.
Avoid credit cards to try to keep up with a life you really don't need and definitely can't afford at the moment.
Avoid unnecessary spending, and learn to make sacrifices.
3. Not Working On Your Credit Score
Did you know everyone starts with zero credit?Your credit score is not something that starts off good and takes zero to nothing to maintain, in fact, your credit score needs to be built up and it requires hard work and discipline to maintain it.
The earlier you start working towards your credit, the better it is for you.
Late payments, skipping payments, and collections are some of the main factors that affect your credit score. Keep this in mind when you're falling behind on your next bill.
TIP: Credit Karma is a good and free app that lets you check your credit score as often as you want.
It's a myth, checking your credit score with this app DOES NOT LOWER IT.
"Soft Pulls" does not lower your credit, and there are different places that you are able to pull your credit score at least once a year without affecting it.
Keep in mind: Credit Karma does not reflect your actual credit. The credit this app uses it's an estimation. Expect your actual credit to be 20-50 points lower than what credit karma shows.
4. No Savings Account
Unfortunately, a lot of people don't have any money to their name aside from their current paycheck. A lot of people won't open a savings account until their 30s or even 40s, and many have a savings account- but don't save.Not having a backup plan to fall on if you lose your job or in case of an emergency is the first thing you want to avoid.
Open a savings account and start making contributions to it as soon as possible. It's recommended to save at least 20%-25% of your paycheck.
If you're still a college student- start by putting aside at least $20-$50 into your savings account, this will give you something to fall on in case unexpected expenses come your way.
TIP: It's recommended to have in your savings at least the equivalent of what you get paid/spend on an average of three to six months. This will provide financial stability until you find another job or solve the emergency.
There are different types of savings accounts, they differ between interest rates, find out with your bank which one of their account options will help meet your current needs, and help achieve your savings goals.
You Should Also Read: How to Save $1K in A Month
5. Not Taking Advantage Of Your Job Benefits
If your job offers benefits and you're not taking advantage of them, you're making a huge mistake.Aside from the paid vacations and sick days or personal days, the most important benefit that a job can offer is a 401k or anything along the lines that will help you start your retirement plan.
One of the reasons people don't take advantage of their benefits its because they don't know what it is or how much it benefits them.
Aside from your employer's contributions the best thing you can do it's to contribute to your 401k as much as you can. All of your contributions are before taxes and before you even see your paycheck- so, in reality, you can't miss money you don't even see.
TIP: Look into your job's benefits during the hiring process and see if they are something you like and/or actually benefit you.
Start contributing to your 401k from the very beginning (or as soon as you can) if you see an amount of money from the very beginning of your check, you won't miss the money that went into your 401k.
Talking about our finances and money situation can be a tricky and sticky subject, but it's one that must be talked about and dealt with.
The sooner you realize the mistakes you're making and start taking control over your finances, the better it will be for you and your future. (click to tweet)
Remember ...
- Avoid Credit Cards
- Avoid living above your needs
This will cut out any unnecessary expenses and any chance of your credit score getting affected.
- Take advantage of your job benefits
- Open a savings account
- Work on your credit score
Start saving for a rainy day today, before it pours. (click to tweet)
Want control over your finances? Ready to get organized? Grab your FREE expense tracker now and start reaching your financial goals today!
2 comments
Great post! I remember learning the hard way how to make sure I had enough money in my checking. When I was in high school, I got my first job and opened my first bank account. I overdrafted 3 times and paid steep fines before finally understanding how my account really worked. I got confused on pending payments. But I didn't get a credit card until I was 24. I still only have one. And I use it sparingly. Just a few years of getting my finances in order has made a huge difference in my credit. Now my fiance and i have a house, and it's all been worth it. He's even more money oriented than me, so I'm excited to see what we can do by saving money throughout our marriage.
ReplyDeleteThanks for reading girl, I'm glad you liked it. omg the same happened to me, I paid at some point hundreds of dollars only on overdraft fees, until I learned to organized myself and get the hell out of that bank.
DeleteDefinitely agree, having your finances in order gives you a piece of mind.
Congrats on the house girl!!