Your 20’s are full of big decisions to make. Do I get married now? Am I ready to have kids? Should I change jobs? Should I stop everything and travel the world? Should I get a mortgage? It can be overwhelming! While money is the key determinant with all these alternatives, it’s funny how it has always been sort of a taboo topic.
Today we break the barriers and talk about the money mistakes anyone in their 20’s should avoid if they want to be rich. Please make sure to read to the end, because we have a great tip for you. Now let’s begin, shall we?
1. Not Saving for Retirement.
With the millennial wave, most youths are opting to become entrepreneurs, content creators or freelancers. There’s nothing wrong with that. The only problem is most people who are earning their own pay cheques, usually the self-employed, typically find it hard or don’t save for retirement all. If you’re working it’s so easy to visit the HR department and set up a 401k savings plan but for those who don’t it’s not that obvious.
The real and dirty truth on savings for retirement is; the earlier you start putting money away into your retirement account or the 401k, the longer that money accumulates in interest and builds a healthy fund that will take you through old age. Financial advisors, usually recommends one to save between 10 and 15 per cent of all your income right from the word go!
2. Not Planning
Attaining financial security doesn’t just happen overnight. Well, unless you are Mark Zuckerburg or one of those innovative gurus. For most of us, it takes effort, time and proper planning. Just like everything else in life, if there’s no plan you’ll just be winging it.
By creating financial goals, you will have targets to achieve, budgets and the essential control over all your money. Having clear parameters about how you will spend your money gives you the right focus to build wealth from a young age. If you want to buy a house, or a car, or buy that new iPhone, you have to sit down and write down how you will make that happen.
3. Starting a Family with No Stable Income/Plan.
It costs about two hundred and fifty thousand for a middle-income household to raise just one child. This doesn’t include the pregnancy stage, maternity leave income loss, medical fees or even college. In short, having a child will cost you a large chunk of your money.
Before you get a baby on the way, make room for them by securing a proper financial plan to raise them. Create a budget including all the necessities to buy, expenses to be incurred and leave room for adjustments. That’s if you want the best for your bundle of joy! Start talking to your partner about all this right away.
4. Poor Tracking of Money.
In your 20s you always want to be on top of all trends, have the best of everything, get the latest phone and be up to date with your peers. While this may be all fun, it can create major dents in your wallet which could take years to recover from!
To solve this, ensure you track all your money expenditure. This is the only way to keep an eye on your spending habits. Your peers may think you’re being too thrifty by watching what goes out of your wallet, but you’ll soon find out that your daily latte, every Friday happy hour cocktails and always buying that new gadget add up to more than you can afford.
5. Poor Credit Card Management.
You just saw that new shoe or sneakers and you want it desperately. You don’t have the money for it, but there’s a piece of plastic that can instantly buy it. Some day you’ll be forced to pay it back with some little interest. Not so bad right? Wrong! The only word that should be used in this situation is BEWARE!
Creating this habit is one sure way of racking up heaps of debt that could cost you so much! Never use credit cards to make purchases you want but don’t really need. Those pieces of plastic can easily turn into a pair of crutches that you will need to survive.
Even successful businessmen like Mark Cuban are against the use of credit cards. We’re not trying to say they are entirely bad, in fact, you need credit cards, not to support a luxurious lifestyle you can’t afford but to build a great credit score. In fact, if you want to get a loan or even rent an apartment the first thing they check is your credit history. It may take years to build a good score, but the easiest way to do this is by following creditworthy practices.
The first practice is to always pay on time if not earlier. Second, pay off the debts with higher interest rates first. Thirdly, don’t open too many accounts at a go. Fourth, ensure you keep the credit used compared to the given limit as low as possible.
Lastly, pay off your cards regularly and always carry a balance of not more than 30% of the limit. Just before we end the article we want to leave you with one great piece of advice. Before you choose a credit card shop around. There are multiple credit card providers, all with different rate and benefits.
Create a long list with all that are available and select the ones with the most lucrative offers. Choose the ones with the best rewards systems, lowest rates and suitable limit. Some even offer cash back benefits of plane ticket purchases and so much more. Just do your homework first! Well, that’s it for today, we hope you enjoyed the article. Please bookmark this article to revise it later on. Share it with your friends and loved ones!
Credit: Practical Wisdom