Five Money Mistakes to Avoid in Your 20s
Your 20s will be one of the best times of your life.
The milestones to the goals and accomplishments you set for yourself, the people you connect with, minimal responsibilities and more. The list goes on!
Between all the fun, establishing a career or getting married and starting your own family, the money management habits you develop will determine the quality of your life and future. While you are still young, be grateful that you have the perfect time to make mistakes as they serve as the currency for experience and lessons for securing your financial future. Here are 5 financial mistakes to avoid in your 20s and the years that follow.
1. Not Creating Financial Goals
You should make sure you have a clear direction in your life so you know what it is you are working towards. Without proper planning, there is no guarantee that you will meet your goals with your hard-earned money. Taking control of your financial future requires setting goals, goals that are S.M.A.R.T. (specific, measurable, achievable, realistic, and time-bound).
2. Not Saving for Your Future or Retirement
Albert Einstein is associated with saying “compound interest is the eighth wonder of the world. He who understands it earns … he does not… pays it.” In other words, delaying retirement savings for your financial future will hurt you in the potential compound interest you can earn on your investments. Compound interest is interest growing on interest. When you save earlier, you have the greatest advantage which is time + compound interest, and this is key for building a solid nest egg.
3. Incurring Bad Debt
The kind of debt that depreciates (loses value), and causes you money. Things like a payday loan, expensive clothes, jewelry, etc.
4. Not Tracking Your Net Worth
Put simply, your net worth is the value remaining after you subtract the things you own (assets) from the things you owe (liabilities). Your net worth can really show you the financial progress you are making towards your goals. The higher your net worth, the healthier you are financially on paper.
5. Not Practicing Delayed Gratification
It may be hard to cultivate the habit of delaying gratification since we live in a society that likes nice things. However, implementing delayed gratification requires self-control and discipline. It maintains the mindset that we must prioritize our spending, and that means knowing the difference between a “need” and a “want”. Although it might be tempting to buy something we see on sale or purchase the latest iPhone. Practicing and also learning to master delayed gratification is one of the keys to building and growing your financial wealth, and it’s also a trait found in many successful people.
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