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When you enter your 20s, you need to know what you want in life. This is the period of learning about investments. By getting the right financial advice for 20s, you can avoid money mistakes in your 20s and put yourself on the road to a secure future.
School is over. You’re young and want to fly high. There are important decisions to be made. You have a new job and the world is your oyster. Go ahead and fly high but also remember to build your safety net, or the consequences could be drastic when you are older. Consider the all-important question: What do I want in life?
Build healthy financial habits and it will pay off rich dividends in later life.
Here are the Top Money Mistakes that you Really Need to Steer Clear off During Your 20s
#1. Avoid Splurging, Embrace Budgeting – Best Ways to Invest Money in Your 20s
Why not use a good budget calculator to check out where you need to spend and where you need to draw the line, which credit card to use, etc. It might reveal some startling home truths.
For instance, your money diaries could be showing that you are spending unhealthy amounts on food, entertainment and need a reality check.
Use budget apps like Mint Budgeting App so that your phone works as your finance advisor. It could help you get rich within no time at all by teaching you good budgeting lessons.
#2. Stashing Money the Wrong Way
Stash your money away in a bank, instead of spending every dime you earn! Sounds perfect, but is it possible, you might ask. You have begun making serious money, so now ask yourself the question: What do I want to do in life? If you want to become financially sound, here’s some inspiration to help you save more and splurge less.
- Make your savings send you messages. This is an important piece of advice regarding money management for young adults.
For instance, instead of a Savings Account with an uninspiring number, change it to something meaningful like say ‘Europe trip in 2022’ or some other life plan/goal. This way you’ll be inspired to save more in the particular account.
- Keep your checking account and your savings account in different banks. This helps you resist the temptation of transferring your savings to checking. Out of sight can truly be out of mind. Of course, you can still have just one savings account in the same bank, for an emergency.
- How to manage money in your 20s? Cash vs. Credit. A credit card is just another word for money. But try using cash for spending. You will realize the pinch and might end up not spending. You realize how much you’re spending and end up thinking twice before you buy something. Works all the time.
#3. Stretching Your Student Loan Payment
Student loan debts are often the cause for people not being able to buy a house or make investments. Start young and be debt free as soon as you can. Don’t be mired in debt for longer than necessary. It is one of the biggest financial mistakes to avoid in your 20s.
You have started making big money, so try making a little more than the minimum payment specified to stay ahead in the game. This will reduce the number of years for paying the loan and also the interest amount and it will help you build wealth more quickly.
#4. Having a Poor Credit Score
You’re done with school and probably wondering why you should bother with credit scores. This is the only age that offers you the opportunity of building your credit score from base. Don’t lose it.
- Check out how credit scores work and how to increase it. No expertise needed, just some basic knowledge should suffice.
Keep an eye on that credit score. You’ll notice how it creeps up when you pay down a balance or make bill payments on time, using a calendar reminder. Stay on top of your credit using free services like credit karma!
#5. Not Planning for Retirement
You have compound interest to thank for this tip. Save $100 a month from the age of 20 and you’ll have a substantial nest egg at the age of 60. Start the same thing at 30 or 40, and you could cut a sorry figure. The early bird does really catch the worm.
Think about investing in your 20s. Opt for the 401(k) match, if your employer offers you one. It means that if you contribute a certain amount towards your retirement plans, your employer matches it with the same amount. That’s free money and you should grab it.
Create a separate account and name it (yes you guessed it) ‘For my Retirement’.
Try to up your contribution consistently, say an increase of around 0.5% every year, or whenever you receive a raise. You could even opt for an auto increase feature.
Wrap Up
These are just some of the things you need to avoid in your 20s to build a rock solid financial future. We all know that habits once formed are difficult to break. It might take some time to form these habits when you are in your20s, but once begun, you’ll be stuck with them for good. We latch on to bad habits involuntarily, but the good ones need to be sought out and nurtured.
I agree that your 20s are the time when you wish to have some fun; you want to splurge and impress your friends by spending, spending and spending. But developing good saving habits could help you reap fine harvests, like buying a home for yourself or retiring rich.
Inculcating all these financial habits might seem like a lot of unwanted pressure when you are in your 20s, but this is the best time to establish a responsible financial plan. Go for it!!!
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