Your 20s is a valuable time for you to figure out life. It’s typical to try out new things and to make mistakes during this decade. For many, they consider these mistakes as moments for growth. They learn from them and try to do better in the future. But some mistakes are best avoided because they tend to have long-lasting consequences.
If you’re in your 20s, that is likely the first time you are dealing with your finances. As you enter the workforce, you learn how to manage your budget. How you handle your money during this decade can directly impact your financial situation in your 30s.
Find out about the financial mistakes that are common to those in their 20s. Familiarize yourself with them so you can actively avoid them.
You spend more than you make.
Once you start earning your own money, it’s understandable to want to spoil yourself. But doing it too often can result in money troubles. Overspending is not sustainable, especially when you have bills and debts to pay. Learn how to budget your money so that you have something set aside from your hobbies and other luxuries. While it might seem stifling to stick to a budget, it sets the stage for financial freedom in the future.
You don’t keep track of your money.
Having money left over at the end of the day doesn’t automatically mean you’re smart with your money. You might not realize it, but those daily coffee shop trips or lunch outs can add up to more than you have. Keeping track of your expenses lets you see how much of your budget you’re spending on necessities and luxuries. There’s a reason why individuals and organizations hire monthly bookkeeping services. It helps them break down how much they spend a month, which allows them to adjust their future budgets.
You still ask your parents for money.
While your parents might be more than willing to loan you money, this dependence on them lulls you into a false sense of financial security. Self-sufficiency should be part of your goals for this decade. Always asking your parents for financial assistance will only keep you from achieving your short and long-term goals.
You don’t have an emergency fund.
There is no telling when an emergency will happen. These unforeseen circumstances can range anywhere from car troubles to unemployment. Your budget will likely be unable to cover these unexpected expenses. An emergency fund gives you a safety net that will prevent you from acquiring crippling debt. Try to save at least three months’ worth of your salary for this fund. Include it in your monthly budget to avoid skipping deposits.
Your 20s is an exciting time to find yourself and figure life out. But it also sets up the stage for the future. Making smart financial decisions now will help you build good habits for your 30s and beyond. While missteps are typical, you should do your best to learn from them. Otherwise, you are prone to repeat them in the future.