Your twenties are the time for fun, hard work, and setting yourself up for the best financial future possible. Here, we go over twenty money mistakes to avoid in your twenties so that you can live your best life now and be debt-free in the future.
1. Skimping on Health Insurance
It might be tempting to skip health insurance; after all, you are in your twenties, so what health crisis could arise? Be that as it may, avoid the temptation to wave off the importance of insuring your health. Even a simple ankle sprain or wrist break can land you at the doctor’s, not to mention all of the more serious illnesses and injuries that can strike even the young and healthy. If you do not have health insurance, out-of-pocket costs can run you in the thousands or even hundreds of thousands of dollars – a debt you do not want to carry around for the rest of your life.
2. Blowing through Your Savings
Just like a health scare, other types of emergencies can happen in your twenties, too. Do not skip out on setting money aside in an emergency fund. It is vital to be prepared for an unexpected illness, car repair, or anything else that might pop up by funding an emergency fund to cover these potential expenses.
3. Keeping up with the Joneses
It might seem like all of your friends have endless amounts of cash to burn to take fun trips and buy expensive things, but the reality is that we do not know everyone’s finances. Maybe those friends are financing their lives with credit cards and are heavily in debt. Do not try to keep up with anyone else. Instead, focus on yourself and spend money on what you enjoy and what you can afford.
4. Abusing Credit Cards
If you choose to use credit cards, make sure to pay the balance back, in full, every month. Many people get their first credit cards in their twenties and make the mistake of carrying balances on the card from month to month – avoid this wherever possible!
5. Not Setting – and Sticking to – a Budget
Without a budget, you are more likely to overspend. Do not make that mistake; instead, start your twenties out-right by assessing how much money you have and what debt (if any) you owe, and set and stick to a budget.
6. Kicking the Savings Can Down the Road
Retirement? You may ask. But that’s for older people! Not so fast. Your twenties are the best time to start investing in your 401(k) or other retirement accounts. The sooner you invest, the more time your money has to grow with the market, which will set you up for financial success in the future, no matter how far off that seems right now.
7. Forgetting to Invest
Even if it is just a little bit, your twenties are the time to invest, and not just in your retirement accounts. By investing early, your money can grow, and you can use it to fund large purchases like a home.
8. Spending More than You Make
Your first “big kid” job might tempt you to hit the town and shell out for dinner, drinks, and in general, enjoy the finer things in life. Instead, spend your twenties living within or below your means. This might mean cutting back on certain extra items, but it will be worth it once you hit mid-life and realize you are sitting on a substantial nest egg.
9. Ignoring Your Credit Score
Your twenties are the time to learn about what your credit score is and how you can improve it. A good credit score is important for renting an apartment and even getting a job, so do not ignore it.
10. Skipping Renter’s Insurance
Nothing is going to happen to my apartment, right? The reality is that we never know. Prepare for the unexpected accident at home by purchasing renter’s insurance. For just a few dollars a month, you can protect yourself and your valuables.
11. Spending on Unnecessary Luxuries
Designer handbags and luxury cars tempt us all, especially in our twenties. Do not give in! You do not need to spend on these items to have a fulfilling life; instead, consider investing in your future by funding a retirement or investment account.
12. Burying Your Head in the Sand
It is important to talk openly about your finances with your significant other, especially if you envision a future life together. Do not make a mistake many twenty-year-olds make by ignoring the financial life (and potential red flags) of a partner.
13. Overspending on Your Wedding
Weddings are amazing! But remember they are also only one day of your life. Do not go into debt funding a dream wedding you cannot afford. Instead, plan one within your means, and your (financially secure) future self will thank you.
14. Financing College with Too Many Student Loans
If you choose to go to college and take out student loans, make sure you understand how much debt you and incurring. If you cannot afford college without thousands and thousands of dollars of student loans, consider postponing it until you can afford it.
15. Buying Many Cheap Things Instead of One Quality Item
Try not to get caught up in fast fashion – buying lots of cheap things that you have to throw away after one wear. Instead, invest in a couple of quality pieces that will last many years and that you do not have to replace constantly.
16. Refusing to Set Goals
Do not forget to set short-term and long-term financial goals. With goals in place, you will be more likely to put aside money and eventually reach these goals!
17. Assuming Your Family Will Bail You Out
Maybe you have been lucky, and your parents have supported you all of your life. While your family might still be around to help out, do not assume they will pay for all of your life choices – good and bad. You are an adult now and should have the goal of financing your own life without anyone’s financial help.
18. Borrowing Money for Non-Essential Purchases
Just like over-spending on your credit card is a bad idea, so is taking out a loan for something you want but do not need. A personal loan can be useful for some, but if you are in your twenties and are thinking about using one to finance your lifestyle, rethink that plan.
19. Starting a Family Without A Plan
Starting a family is an exciting prospect and something many people in their twenties do. If you can, before you start one, make sure you know how much that family is going to cost. Remember, babies are cute but also expensive!
20. Renting Beyond Your Means Just to Live in a “Cool” Neighborhood
Lots of people in their twenties start new jobs and move to new cities. You might be tempted to find an apartment in the coolest neighborhood, but those apartments are usually the most pricey. Skip the high rent and go for an apartment you can afford.
Your Twenties and Beyond
Whether you are in your twenties or beyond, hopefully, these tips have given you some ideas as to how to prepare yourself for the best financial future possible. If you find yourself a little off-track and with some debt, you are struggling to purge, in addition to following these tips, there are other ways to get back on track. Consider reaching out to a debt consolidation company like CountryWide Debt Relief to discuss debt-relief options, such as debt consolidation loan, credit card consolidation, or debt settlement, as a way to free yourself from debt and regain control of your finances.