In your 20s, you are either in your last year in the university, just starting your career or setting up a business. Either way, you are still new to many things and just building up yourself.
Your 20s is the time you learn, make mistakes and grow. People say you can’t grow if you don’t make mistakes; however, there are some costly mistakes you should try to avoid. They might end up helping your growth but spoil a lot of things before then. One of such mistakes is money mistakes.
Money mistakes are made when you don’t have enough financial knowledge, and this can land you in debts you have to keep paying for, years after. Below are 10 top money mistakes people make in their 20s and how to avoid them. These tips would help you to make wise money decisions from now.
The top money mistake young adults make is emotional spending; Many spend to make themselves feel happy. If your happiness is tied to spending, you will have a problem trying to save up or plan for the future.
SUBSTITUTING GROWTH FOR MONEY
In your 20s, you are just starting your career. You will have many job offers with mouth-watering pay. It is only logical that you choose a job that offers growth instead of money, if you are interested in making more money in the future. You might want to start making enough “dough” now, but in the long run, if you don’t increase your value, you are going to remain stagnant.
“NOT CUTTING YOUR COAT ACCORDING TO YOUR CLOTH”
Young adults tend to spend more than they earn because they want to stay in vogue. This is a common money mistake many make. If you spend more than you make, you tend to run into debt quickly and become financially unstable. Your 20s are not the time to live in luxury (unless you can afford it) or buy the things you cannot afford. If you will save more when you stay with your parents than if you stay alone, why not stay with them? If cooking at home would save more costs than buying food from restaurants, why not cook at home? Don’t live beyond your means.
SITTING COMFORTABLY IN DEBT
Many young adults are comfortably sitting in debt. Understandably, some situations might warrant you taking loans like student loans or personal loans. However, it is a wrong move to stay in debt for a long time. You should save up or look for other sources of income to settle your debt. ‘Don’t sit comfortably in debt’.
NOT SAVING UP FOR EMERGENCIES
Emergencies are money-draining circumstances that are unplanned for. To prove that you are financially stable in your 20s, you should save up for emergencies. Young adults often make the mistake of not saving up for emergencies, hence, hitting them hard when it (emergency) comes.
NOT HAVING A FINANCIAL PLAN
For every facet of life, it is essential that you have a plan; however, having a financial plan tops it all. Having both short and long-term goals shows that you are serious about being financially stable.
NOT KNOWING THE DIFFERENCE BETWEEN “NEEDS AND WANTS”
The importance of knowing the difference between needs and wants cannot be overemphasized. In your 20s, you should know the things you truly need and the things you can do without. Your needs should be 90% of your budget if you are seeking to become financially stable.
RELYING ON ONLY ONE SOURCE OF INCOME
Have you ever stopped to ask yourself, ‘what if I lose my job?’ or ‘what if this business crashes?’ It is very risky to rely on only one source of income. You are most energetic in your 20s; it should be the time you take on different jobs to earn more money.
As a young adult, you must track your spending always. There are many tools and mobile apps available to do this. Track your spending to make sure you are not spending more than you are receiving. You can do this by putting down your expected monthly income and plan how you are going to spend it, including your savings and emergency fund to the expenses. This way, you don’t buy on impulse because you have a financial vision for the month.
NOT HAVING HEALTH INSURANCE
Many young adults don’t see the need to have health insurance, and this is a huge mistake to make. Health insurance gives you peace of mind and saves you from spending more. It also shows that you are concerned about both your health and your finances.
We have not only discussed the money mistakes people make in their 20s but also put out tips on how you can avoid them. You don’t have to make these mistakes too before you learn how to be financially stable in your 20s.