We’ve all made money mistakes, but developing great habits early can help you avoid some of the devastating consequences. Below are 5 money mistakes you should avoid in your twenties.
Many people in their twenties don’t save because they feel they don’t make enough money. Even if you can only put $5 into savings each week, it’s worth it. In time, that money will add up and when you do start making more money you’ll already have developed a habit of saving. It’s also important to have a specific purpose in mind for your savings. Are you saving up for an emergency fund? If so, what constitutes an emergency? Are you saving for a home? If you don’t give your savings a purpose, you’ll find yourself pulling from that account the next time you want to go out to eat with your friends.
Putting Savings Into An Easily Accessible Account
Sometimes having a purpose for your savings isn’t enough to keep your hands out of it. If your savings are in the same bank that you have a checking account with and you can easily maneuver between the two accounts, you’ll have a hard time not digging into it. Try to look for an account that takes a few days to transfer to your checking account. Also, look for an account that will acquire a good amount of interest.
Spending What You Don’t Have
Don’t get caught in the credit card trap. Credits cards can be good for building credit, but what will destroy your credit is buying things on your credit card that you can’t afford to pay off. Also, if you’ve had a good paying job for a few years, then a zero credit score can suffice for most large purchases. You don’t want to go into debt with credit cards and loans.
It’s so important to know where your money is going. Your budget is also a great place to establish priorities. Do you want to pay off your student loans in 6 months or do you want to eat out every weekend? Which is more important? Budgeting is simply deciding how much and on what you want to spend your money. Having a clearly organized budget will also help you see where you can cut back and save more money.
Not Having Short Term & Long Term Goals
If you don’t have goals for your money, it will get unorganized very quickly. What’s your long term goal? If your long term goal is to be debt free, then you can make short term goals that will help you get there. Having a vision for your money will help you to avoid each of the earlier mistakes. When you know what you want, you’ll save for it. You’ll put those savings in a place that are not easily accessible. You won’t spend what you don’t have, and you’ll budget to be sure your money is going exactly where you want it to.