The twenties are perhaps the building phase of your life when it comes to finances. After all, this is the time when you choose a career and get settled in it. At this same time, you tend to make mistakes and learn from them during this decade. You may be taking a student loan in the early twenties and then repaying it once you reach the mid-twenties. Gradually, as you take up a job and start earning, you will need to learn handling finances, savings, credit cards, and debts.
There is a lot of scope for errors because the experience with money is minimal. You may spend frivolously or make wrong investment decisions. Still, most of these mistakes are avoidable if you are aware of them and take the right approach. Here is a list of mistakes that you need to avoid in the twenties to build a secure and stable financial foundation for life.
Mistake #1: Spending more than you make
Whether you earn in hundreds, thousands or millions, over-spending will always get you into a fix. This is something that most youngsters tend to do because they love the freedom of their own money. However, spending too much consistently can cause the bills to pile up and you may even be buried under debt. The secret to building your wealth lies in living within your means, month after month. Rather than spending, you need to focus on expanding your savings and becoming financially secure.
Mistake #2: Not having long-term financial goals
At this age, you may not know the significance of having long-term financial goals but nothing matters more. If you don’t know where you will be in your thirties right now, you will probably be nowhere. Plan your goals, whether you would want an X amount in your savings or your own house by the time you are thirty. Having a clear roadmap to achieve these goals is equally important.
Mistake #3: Not exploring alternative income streams
In case you are lucky, you will nail a dream job that gives you good money and satisfaction as well. But not exploring alternative income streams in the early years of your career is perhaps the worst mistake you can make. If you ask how to make money fast, pursuing a side hustle is definitely the best answer. Not only does it boost your bank balance, but also gives you a risk cover in case you lose your job suddenly. Beyond everything, it increases your confidence too.
Mistake #4: Not tracking your money
Not keeping track of your finances in the twenties invites trouble for life. Tracking your money makes you aware of your spending habits so that you can rectify them at the right age. It also unfolds the mistakes you may be making because young people often think that they are being thrifty but the truth may be just the opposite. For example, you may believe that you are saving by buying stuff in sales but you may actually be spending more than your budget or buying things you don’t need.
Mistake #5: Not maintaining an emergency fund
Emergencies may happen anytime, whether you are in your twenties or forties. Not maintaining an emergency fund right from the start is a blunder, which young people often make. When you start earning, you should keep some amount every month and save it up in an emergency fund. It is a good idea to open a small savings fund and keep accumulating money over the years. Whether it is an accident, a parent falling sick or a sudden loss of a job, an emergency fund can come to your rescue.
Mistake #6: Living off credit cards
The credit card trap is something that you should absolutely avoid, whether you are in your twenties or older. You may want something desperately and that piece of plastic appears as the best way to get it. However, you should avoid using it because you may build a habit gradually. Remember that credit does not come for free and also elevates the risk of overspending. Rather than reaching out for the credit card in your wallet, spend cash for wise spending and more savings. Moreover, minimal usage of credit cards saves you from debts.
Avoiding these mistakes when in the twenties can make all the difference to your financial future. While you can have a more comfortable life in the later years, it also gives you the option to explore the idea of early retirement. Being well-informed matters and so does refining your spending and saving habits!