Most common financial mistakes people make in their 20s
The twenties are an exciting time in any individual's life. From securing your first job and getting your first paycheque to finally being able to make your own decisions, being in your twenties is an exhilarating period for most people. However, one’s 20s are also the time when people start experiencing real responsibility for the first time. Most of these responsibilities are related to money. Paying off student loans and saving your income smartly are just a few things that most people need to familiarise themselves with. Several young adults make money mistakes owing to lack of knowledge, which can result in financial insecurity and debt early on in their lives. Here are five common financial mistakes people wish they realised in their 20s:
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Spending money to gain temporary happiness
A lot of young adults confuse spending money with being happy. You don't have to splurge two months of your salary on buying the latest gadget if you're going to upgrade it to the next model when the year changes. Spending money for temporary happiness can drain your savings like little else. If you're having a bad day, don't pick up your wallet and head to the mall. Shopping won't solve your problem, talking to friends and family will.
A lot of young individuals push the idea of making investments to a later date as they want to enjoy their lives and live in the moment. However, what they fail to understand is that while making investments might seem confusing and boring, it will benefit them greatly in the long run. If you don't have someone to help you make the right investments, you can always seek professional help.
Not bothering with emergency savings
Having sufficient funds to pay for your indulgences might seem like more than enough money, but saving for a rainy day is more important than you think. Bad times don't announce their arrival beforehand. You never know when you might need a substantial amount of money in the middle of the night. Being self-reliant is not only about earning money, but also about being able to support yourself when the time comes.
Being too frugal
Being too frugal is the complete opposite of not saving at all. You might have student loans to pay off or you might be saving up to make the down-payment on a house, but don't save all your money as it will get dull over a period of time and lead to binge-spending. Instead, set aside a certain amount every month for your indulgences in order to strike a perfect balance.
Not setting long-term financial objectives
One of the most common mistakes that young adults make is concentrating on short-term financial goals like paying off bills and rent. While short-term financial planning is necessary, long-term planning is equally important. Set a target of how much you want to save in a year and start working towards it. This will make you more financially secure and aware in the long run.
Make sure you don't make the above mentioned mistakes as they can cost you dearly down the road. Instead, save smartly and invest wisely and you'll be better-off than most of your peers.