Money mistakes to avoid in your 20s
Your 20s are the time to make mistakes, take risks and throw caution to the wind.
While the 20s is a time to learn from your mistakes and enter adulthood, it is also time to avoid making substantial money mistakes that may follow you later in life.
Accumulating debt, living carelessly without saving or investing, and making impulse financial decisions are just some money mistakes to avoid in your 20s, no matter how tempting they seem.
Not saving or investing money
Contrary to popular belief, enjoying your 20s does not mean you have to live on the edge and party daily. Most people in their 20s make the mistake of living paycheck to paycheck.
They avoid saving and investing their money for the future. Rather than saving and investing for short-term goals like buying a laptop or phone, the go-to option is to buy on EMI and pay for it in installments.
Neither do they create contingency plans in case of job loss or medical emergency that can lead to significant financial distress?
Not saving and investing is a huge money mistake to avoid in your 20s. The 20s is the best time to invest money and reap the benefits of compounding.
Suppose you earn Rs. 40,000 monthly salaries and decide to invest Rs. 10,000 monthly towards mutual funds (assuming a 10% interest rate for the next 20 years).
You can amass nearly Rs. 77 to 76 lakhs by doing so consistently. If you keep increasing this amount as your salary increases and decide to diversify your investment, your corpus could be large enough to support your long-term plans.
Borrowing money from parents, friends, and family
Another money mistake to avoid in your 20s is to borrow money from your parents, friends, or family.
Try to budget your expenses and spending so that you don’t have to borrow money from your family members.
The 20s is the time to take charge of your life financially; relying on your friends or relatives can create rifts and make you more dependent.
The best way to avoid this mistake is to keep your expenses less than your income and actively reduce any debt!
Additional read: Money mistakes to avoid in your 30s
Taking on too many EMIs and Loans
In your 20s, getting a new phone or taking a spontaneous trip abroad is tempting to shake off the week’s stress.
These luxuries are guilty pleasures you should enjoy when you have the money to spare; taking a loan to finance your foreign trip or buying a new phone on EMI can be problematic and a huge money mistake.
Budget your expenses, take trips without your budget, and destress through activities that do not cause you financial stress later in life.
Try to be practical and save for your luxuries rather than take loans to satisfy them.
Living to the fullest
The 20s is the time to live life to the fullest! It is true, but the 20s are not the end of your life; you don’t have to disturb your future financial goals or take on debt to keep up with an unrealistic lifestyle.
Live your life, think about the future pragmatically, and invest cash towards your retirement. Try to be careful and responsible with your money early on so you don’t have to regret it later!
Spending more than your income
Spending more than your income is a money mistake to avoid in your 20s! Most young adults make the mistake of not budgeting and overspending.
This can easily be avoided by creating a budget and following it properly. Try to be conscious of where your money is going, and avoid eating out too much or ordering in.
If possible, place a daily limit on your credit card to avoid the urge to overspend.
Young adults often end up overspending out of peer pressure and to fit in. Whether it’s buying trendy clothes you don’t need or partying every day, it’s essential to embrace your limits and not follow others blindly!
Not investing in yourself
Not investing in yourself is crucial to avoiding money mistakes in your 20s. While learning to budget, save and invest money, you might forget to invest in yourself.
Like the late Rajesh Jhunjhunwala said in a conference that his worst investment had been his health, you too need to find time to invest in yourself.
Whether it’s exercising, learning new skills, or indulging in a recreational activity. Take some time out for yourself and prioritize your physical and mental well-being to stay happy and healthy!
Live in the present but invest for the future. Make sure you make the most of your 20s and avoid money mistakes that can cost you or your family a bright future.
The 20s is the time to cultivate futuristic habits like financial planning and budgeting that can change your life for the better!
Consult an expert advisor to get the right plan