It’s certainly not easy to think about the future when you’re in your 20s and your life is a bit crazy to begin with. Add to that the fact that 40% of young adults in America today are working in jobs that don’t even require a degree, an extremely high rate of underemployment to be sure, and you’ve got a recipe for financial mistakes. Most young adults also face student debt, which averages just under $30,000, as well as the regular expenses that all else have led housing, healthcare and transportation, all of which are getting more expensive.
There is good news, and it’s simply this; if you make the right choices now, in your 20s, you can greatly improve the chance that you are in great financial circumstances later in life. Below are a number of money mistakes that, if you avoid them, will help you to reach retirement in great shape. Enjoy.
Mistake 1: Running up a high amount of credit card debt. Ironically, even though most people in their 20s have very low credit scores, they carry more debt than any age group, approximately $23,000, on credit cards. This often leads to missing payments and of course a lot of extra money paid in interest and fees. Frequently opening new credit lines can also lower your credit score, something that will lead to much higher interest rates when it’s time to purchase a car or home.
Mistake 2: Not being confident when it comes to negotiating your salary. Financial experts say that a person who doesn’t negotiate their salary correctly during their career could risk losing up to $500,000. When it comes to money, sometimes it pays to be brave.
Mistake 3: Overlooking renters Insurance. Very few young people invest in renters insurance when they are in their 20s, but a cheap insurance policy will protect their belongings in case there is a fire, burglary, flood, tornado or other kind of act of God. That’s a shame because it’s really cheap to protect your investments and one of the best way to protect your finances.
Mistake #4: Overlooking life and health insurance. In 2013 almost 20% of all young people aged 19 to 34 were uninsured, according to a study by Commonwealth. With the new Affordable Care It’s possible to piggyback off of the insurance plan of your parents until you turn 26 and most employers offer health coverage, but if you have neither of those it’s a very good idea to get your own life and health insurance policies. Also, be aware that while choosing the cheapest plan might seem like a good idea as far as monthly bills are concerned, the cheaper plans also come with prohibitively high deductibles.
Mistake #5: Living in a city or town you can’t afford. Many young adults make the mistake of heading right to the nearest city once they’re done with college, something that sounds and looks good on paper but might end up costing a lot more than they realize. The fact is, if your mom and dad are open to it, living at home for a few years while you build up your finances and put money aside for buying home as well as an emergency fund, among other things, is probably a much better idea. (Unless of course you’ve been offered a fantastic job with a fantastic starting salary.)
Mistake #6: Forgetting to save for retirement. We’ve said this before and we’ll say it again; putting aside money for retirement as early as possible is really the smartest financial move you can make. With the benefits of compound interest on your side, the money you actually saved during your 20s will be worth a lot more than what you put aside once you reach your 30s, 40s and 50s.
And there you have them, 6 common mistakes that young adults make and what you can do to avoid them. If you have more questions you can always leave a comment here or send us an email. We’ll get back to you ASAP with answers and suggestions.
This is awesome advice. These are mistakes most people are making in their twenties, and it’s kind of creating a huge credit issue among this generation.