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6 Money Mistakes People Make In Their 20s And How To Avoid Them

6 Money Mistakes People Make In Their 20s And How To Avoid Them

It’s easy to make mistakes in your 20s. After all, you are still growing and learning. Unfortunately, many people in their 20s make poor financial choices. And these wrong money steps can have a lasting impact on many areas of your life. Here are some common money mistakes made by people in their 20s. If you are a young reader looking for advice, you can learn from these mistakes.

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Building credit card debt

Credit card debt is a problem that many people face. While credit card balances fell during the 2020 pandemic, many consumers still managed to charge these high interest rates. According to Experian, the average credit card debt of Gen Z consumers (18-23) in 2020 was $ 1,963. For millenials (24-39), the average debt was much higher at $ 4,322.

If you are not careful, credit card debt can quickly get out of control. When using your credit cards, make sure you make responsible choices. Pay only what you can afford to pay in full each month. Otherwise, expensive credit card interest rates accumulate.

If you have credit card debt, this credit card payout calculator can help you calculate interest rates and sort out a debt payout plan.

2. Ignores the need to prioritize savings

Building a savings is a must, especially since you never know when an emergency will occur. By having extra money set aside as an emergency fund, you can pay for unexpected expenses without feeling stressed. Without savings, you can make choices that put you in debt.

Do yourself a favor and open a savings account. Setting as much as $ 100 a month will save $ 1,200 after one year. Configure automatic withdrawals so you do not forget to save. This way, when you need access to additional funds, the money will be there.

Use a debit card instead of responsibly using a credit card

A debit card can be easy to use as it is directly linked to your bank account but it is not the best option. Therefore, we do not recommend using your debit card for regular purchases:

  • You will not earn valuable credit card rewards
  • Your actions do not improve your credit rating
  • The litigation process of fraud or unauthorized prosecution can be time consuming
  • Most debit cards do not include additional benefits such as extended warranty coverage or return protection

Instead, apply for a rewards credit card. You can use your card to responsibly build credit, get extra perks, earn rewards on your expenses, and have built-in protection against credit card fraud.

If that’s not enough to convince you, this story of a woman who was accidentally charged $ 5,700 for a latte will make you put your debit card away for good.

4. No budgeting

Many young people do not take the time to budget. Instead, they spend now and worry about their finances later. Creating and following a budget is a smart idea. By doing this, you can better outline how you plan to spend your money each month, minimize unnecessary expenses, and achieve your money goals faster.

If you are new to budgeting, this budgeting guide is a great place to start. And if you prefer to organize your budget electronically, check out the best budget apps.

5. Saying yes to expensive activities and events

If you are in a tough financial situation or prioritize saving and paying off debt, do not be afraid to be vocal about it. Your friends may not have the same monetary goals as you. If you are invited to expensive activities or events that fall outside your budget, be open and in advance.

Do not give in because of guilt or embarrassment. Instead, suggest other cheap or free activities to do together. It is possible to have fun with the people you love without going into debt or spending more than you can comfortably afford.

6. Does not negotiate wages

If you are able to increase your income, you will find it easier to save more money. Many people in their 20s take jobs offered to them without negotiating their pay or benefits. This is a mistake as you may be able to increase your salary by simply asking during the hiring process.

Even if you can not get a pay rise, you can try to ask for more benefits. Good benefits can improve your quality of life. If you are thinking of applying for a new job, here is a useful guide on salary negotiations. And if you’re in a position you love but think you’re making more money, these tips can help you negotiate a raise.

These money mistakes can create significant financial problems. But avoiding them in your 20s can help you set yourself up for better financial success. For more advice, check out these personal finance resources.

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