Your 20’s are a golden age of self-discovery, a time to fully branch out and grow. At this stage, many people are graduating from university, rounding up their service year, getting married, and starting a new career path. The not-so-good news of this stage is that the novelty of these new experiences might lead to some mistakes and the good news is you have time to recover and grow. But you don’t have to make all the mistakes yourself, others ahead of you have made these mistakes which you can learn from them. Here are 5 financial mistakes that many people in their twenties fall prey to and how you should avoid them:
1. Keeping up with the Joneses
Your roommate, Bassey, graduated from university and immediately bought a car, moved to some posh neighbourhood and posts pictures of himself on Instagram attending a party every Friday night wearing expensive designer outfits. One of the biggest mistakes you can make is to try to live up this lifestyle. It’ll only lead up to you running into debts and being miserable if you don’t earn as much as Bassey does. The point is, many of your “Basseys” are living ‘the social media life,’ most of them can’t sustain that lifestyle. So instead of trying to keep up when you can’t afford that lifestyle, work hard and steadily build up your finances and experiences.
2. Never Learning to Budget
Budgeting is a necessity if you want to keep track of where your money goes. Because, like it or not, it’s hard to save when you have no idea what you’re spending your money on in the first place. To get better at budgeting, follow the “50, 20, 30” rule of money allocation. To do this, devote 50 percent (or less) to essentials—like a roof over your head, transportation, feeding, and utilities. Put away 20 percent for the future, which includes saving for goals, retirement, marriage, or buying a house. Finally, allot 30 percent towards things you enjoy like movies night out and travelling.
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3. Neglecting the Future
This happens in two ways; not saving for retirement and not having emergency savings. When you are struggling to find your footing, and to make ends meet, it can be tempting to postpone retirement contributions. However, the money you invest in your 20s can really begin to work for you over the years. If you start a habit of investing good amount now, you will be able to save enough for retirement. Also, Savings provides you with a safety net. It also helps you move forward to the next step. When you have no savings, you lack the ability to deal with emergency expenses. Saving money can help you stop living in fear.
Your 20s are an important stage, don’t be afraid to utilise it wisely. Read books and blogs about money. Listen to/watch shows about money. Find someone older and successful that will mentor you about money. Learn about money to make more money.
Read also: How To Survive On Your Own As a Youth