Being in your 20s should be a lot of fun. It’s when you get your first post-graduate job and often even move to a new city. This time period also comes with a lot of unique challenges though, too. It’s important that you don’t make any mistakes that could have long term ramifications, but this is all too common with this age group.
Here are four common money mistakes you’ll definitely want to avoid.
Not Starting on Retirement
Don’t fall into the trap of thinking that someday you’ll make a lot more money and it will then be a lot easier to contribute to your retirement. This may very well be true, but it’s also not a risk worth taking. If the Great Recession taught us anything, it should be that you need to plan ahead as prudently as possible.
Use an investment vehicle like a Roth IRA or 401(k) through your company and begin putting away as much as possible. Every cent counts in the long run.
Spending Every Paycheck
For most of us, our first “real job” paycheck after college was incredible. It was more money than we had ever held at once even if our annual income really wasn’t anything to write home about.
The mistake a lot of people in their early 20s make is stretching this paycheck way too thin. They get the biggest apartment possible, a new car, some fun toys and fund a nonstop social life.
While this kind of spending may be possible for a while, it will eventually become unsustainable and, at the very least (if you’re lucky), you won’t have any money left over for savings.
Not Having an Emergency Fund
Retirement is important but so is preparing for not working in the near future. If you get laid off or are otherwise without a job, how will you survive? Most experts recommend that you have an emergency fund capable of lasting you six months if necessary. This needs to include the essentials like food, rent, utilities, etc. and a bit of a buffer. Look over your monthly expenditures to find out the exact amount you need.
Piling Up Credit Card Debt
Credit card debt is one of those problems that seems small at first, but can quickly metastasize into something that ruins your life. This kind of debt can put you in the crosshairs of collections agencies, wreck your credit and even force you into bankruptcy before you’re even 30.
Use credit cards only for buying what’s necessary. Once you start using them to pay for things you don’t need, it can be tough to stop. Look for one that will give you useful rewards and always, always, always pay off the entire balance at the end of each month.
The decade before your 30s should be a blast. Hopefully, the above doesn’t make it seem like being mature with your money needs to put the damper on this fun time. Instead, by avoiding the above mistakes, you’re ensuring that your 30s can be equally enjoyable.