6 Money Mistakes 20-Somethings Make—and What to Do About Them
While life in your 20s is often a great peak, it is also a time where people incur debt that they may be paying off for the rest of their lives. Between student loans, car loans, new bills and financial immaturity, there are a lot of mistakes to be made. These mistakes are common, but can be avoided or fixed if they are at the front of the mind.
It is important to remember that while you are young, you have time to recover in the future from some financial mishaps. However, if you begin making good choices from the start, you may not have too much of a mess to clean up in adulthood. Here are six money mistakes that 20-somethings make and what can be done about them.
1. Not taking financial control early.
Young people are just starting out in their career and their lives, meaning they are not making a lot of money, but they are in need of a lot of things. It is important during this time to budget accordingly and to not start racking up debt because your needs and wants are greater than the number in your bank account.
Save for things in the short term such as a deposit on an apartment or a new professional wardrobe, while also creating a nest egg to fall back on. If you begin saving early, then not only will you be prepared for retirement, but you will also be prepared for the unexpected expenses that hit us all at some point. Create financial goals in order to make a steady base for yourself and avoid going into debt.
2. Trying too hard to pay off student loans.
Student loans are likely going to be there for you for a long time. Although they may make you feel like you are in debt, it is important to keep a balance between what you are paying each month and what you are earning.
It is likely that your student loans have a low interest rate. So, if you run out of money trying to pay them off, but then have to borrow money at a high interest rate because you have run into an expense, then you are wasting more money on interest. Student loans are also typically tax deductible, so having that balance and paying the minimum every month can give you perks in the long run.
3. Declining disability insurance.
Becoming injured to the point that you cannot work can be detrimental to your bank account and make you suffer financially for a long time to come. This can cause bankruptcy and other stigmas that will follow you for the rest of your life.
Social security and the government are not likely to be of much help if you get injured. Not only do claims take a very long time to process, but if they do payout, it is a minimal amount of money.
Young people have the option of getting disability insurance for reasonable rates, and often through their employers. This can be helpful through pregnancy if an employer does not pay a full salary during maternity leave, or in the case of a severe illness.
4. Not having enough life insurance.
Young people qualify for the best rates for life insurance, and life insurance through a job is often not very comprehensive. Individual coverage is affordable and having life insurance is an important way to consider anyone who may be impacted financially if you were to die.
5. Declining employer benefits.
If an employer offers to match part of a retirement contribution, definitely take them up on that offer to the fullest extent. While some benefits may seem like they will only be useful in future years, getting them early will benefit you in the long run.
6. Overspending on your wedding.
While this may be the best day of your life, it does not need to cost a lifetime of money. Years down the road, you will not remember each small detail of the beginning of your happily ever after, you will likely only remember the people who you shared the day with. Don’t let your wedding day put you in great debt.
The biggest money mistake that 20-somethings make is not thinking about the future. The more wise you are with your money early on, the less of a mess you will have to clean up during your older years.