The 20s are the second decade of a person’s life, and the transition from teenage still feels fresh in this period of one’s life. As a result, it is easier to take things for granted than it will be in one’s 30s when life reveals more of its irreversible realities. One such thing many young people take as nothing is money management. Unfortunately, the carelessness in handling finances if unchecked does not just stay in the 20s but can encroach into the 30s and beyond.
A lot of cases of being broke throughout one’s adult life didn’t start as a result of staying out of job or having little or no opportunity to make money; they arise mainly from errors made with money gotten. In this blog post, we’ll be sharing with you, 10 Common Money Mistakes People Make In Their 20s.
- Spending above your means
There is nothing as easy and as sweet as having money and spending it anyhow one deems fit. The good life is what we all desire, but when we understand that it may endanger our financial resources, it is important to stay within the bounds of our earnings, and so build wealth. The deception of receiving salaries every month or wages every day is that the next payment is guaranteed, which should motivate carefree spending as long as it can be afforded.
More so, when there are people to impress, it becomes difficult to resist the urge to buy the same costly things they have or go to places they frequent, even though we do not have the same financial power as they do. By no means does doing so keep a person’s head above debts and other financial crises.
2. Taking no heed to having an emergency fund
It is expected that with earnings come savings. One of the most important forms of saving money is building an account for emergencies because they are bound to happen. An emergency is a happening that needs immediate attention, without which events could turn sour. It could take the form of losing a job or paying for a distressed relative to return home from a crisis-torn area. When there is no money reserved exclusively for emergencies, it is very difficult to wiggle out of a financial embarrassment without paying for it the hard way.
Hint: To save for emergencies, designate a particular account for such, and regularly fund it with a certain percentage of your income. Your bonuses and allowances should all go into your emergency account. Do not, for any reason, take out from that account until an event that requires urgent action takes place.
- Having no laid down financial goals
Without a goal, it is vain to pursue a cause. To be rich is a goal and the plans to attain it follow thereafter. Paying off debt is also another goal. Basically, having a goal is enough motivation to plan well, financially. With the goal in sight, it is easy to make realistic plans to achieve it. Just as in the case of an emergency fund. Without such a financial goal, one will not save and must have well-positioned themselves for financial failure.
- Being unrealistic with one’s financial expectations
Having newly secured a job that pays well in their 20s, some persons make calculations with their yet-to-be-seen salaries for projects they intend to fund. They have already gone borrowing with the promise that they would pay once they are paid. Unfortunately, such plans do fail, as it is not guaranteed that they would last long in the said jobs. That brings us to the next mistake, which is…
- Depending solely on one’s basic salary
A recession in the economy can lead to the downsizing of the workforce. Once that happens, those that had only earnings from salaries to depend on would be in a huge financial fix pending when they secure another job. As much as a salary pays, it is important to have a side hustle with one’s spare time to not only have another source of income but also to have something to fall back on when the mainstream source fails. Many failed to understand that, a mistake can lead them into the -grace-to-grass syndrome.
- Waiting until retirement to start saving
Hmmm. This is not only a mistake but also a foolish financial mistake to make. Having no savings until one retires amounts to planning to live from hand to mouth in one’s not-so-active years. It is better to start now to invest in retirement from your 20s, with your personal savings or through your company’s retirement plans.
- Planning a big event without a budget
Forget the ultra-rich personalities who can spend thousands of dollars on a go. You’re yet to be like them, so you’ll need to sit down and work out a budget for that big event, whether it is a wedding or a birthday party. As exciting as they are, they end in a matter of hours, but the indelible mark of going bankrupt could remain for a very long time. In the spirit of trying to show off as rich, many people in their 20s have landed in deep seas of debts arising from big events they hosted.
- Not taking note of the little spending
It appears financially harmless when saving, to buy a bottle of beer every day given that it is less than a dollar on average. However, when it is tracked, one would notice that the leakage is from the seemingly friendly spending where much money isn’t spent at a go. Without being mindful of the long-term effect of little, everyday expenses on habitual wants, many have run out of money quicker than they planned.
9. Credit cards
Where misunderstood and misused, a credit card is a trap in the form of a blessing. It is a payment card issued by a bank for use by the cardholder who could pay for goods or services with the card with the promise to pay back, alongside other interests, to the card issuer (the bank). Though having a credit card makes a business credible, it is a debt builder when someone decides to live off it. The desire to have anything their eyes see leads to the misuse of credit cards. Before one is able to realize it, debts owed to the bank will be too scary to pay off.
- Not taking calculated risks
Granted that life is full of risks, it is expected that risks well assessed be taken in order to avoid getting hurt unnecessarily. Investing money in a Ponzi scheme is an uncalculated risk and a dangerous one at that. It is advisable to read between the lines of every term and condition stated for a business venture. This will help to ensure that a person doesn’t get entrapped by conditions that are difficult to get out of without spending one’s life’s savings.
In conclusion, if there’s any time to start taking life seriously, that’s your 20s. You’re no longer a teenager and life can only become more and more complex from the day you clock 20, so it’s wise to be smart with your money.