For this present generation, your 20s may seem like they are all about embracing mistakes. when it comes to issues of money, what you do now can make or break your future in financial success. Here are some solid money mistakes you must avoid in your 20s.
1. Not Budgeting :
Failing to set up and follow a monthly budget in your 20s can leave you living from one paycheck to the other paycheck. Worse yet, you may find yourself swimming in debt when you are tempted to spend more than you earn. But if you have a well-planned budget, you can not only stay in the black but can also save for emergencies or and your retirement. In other to get started, you will want to track all your expenses using a budgeting app or pen and paper. To create your budget manually, list out your monthly expenses and then subtract them from your total income. From there, you can figure out which unnecessary costs you can cut back on in order to reach your savings goals and Pay for essentials.
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2. Not Saving for Emergencies:
An emergency fund can spare you from major debt if you suddenly lose your job, or maybe experience a medical emergency or incur any other unexpected costs, like an expensive car fixing or so. Your savings should cover six months’ worth of expenses. Ideally, this would give you a bit of the flexibility to bounce back from the emergency. To make your savings convenient and consistent, it helps to set up an automatic transfer from your checking account to your savings account around the day you get paid.
3. Delaying Retirement Savings:
Only about 55% of all millennials are saving for their retirement, according to the 2014 Wells Fargo Millennial Study. However, the key to building a solid nest egg is starting as early ( especially in your 20s) enough to reap the benefits of compound interest. Compound interest allows us to earn interest on our original investment, plus any money our account accrues in the form of interest over time.
4. Accumulating Bills :
Short-term consequences of not paying your bills could include having to pay various fees, and also higher interest rates on loans and credit cards. Bills that remain unpaid for extended periods of time are most likely to be handed over to collection agencies, in which case your debt may be reported to the credit bureaus (for those in the US, particularly outside Nigeria). Once the delinquency is reported to the authorities, your credit score could suffer until the entire debt is paid. Even after you may have paid up, collections generally remain on your credit report for about seven years. Properly setting up automatic payments on your bills is an easy way to avoid paying a heftier price for your bills in the long run.
5. Rushing into Marriage or Starting a Family
The costs of a wedding and Child-rearing in Africa can set a young couple back financially before they even get the chance to harmoniously merge their finances. There has been a steady increase in the costs of weddings over the years, and this suggests we will be paying even more for “I dos” in 2020. Raising children is the hard part because it’s not a one-day thing. So as you are still considering the money angle while making your family decisions it is not necessarily what your heart wants.