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Although there is so much fun being young, your twenties give you the chance to create or break your financial future. Time can be your greatest ally or your worst foe. You could make expensive mistakes if you don’t comprehend the value of time and money. Here are some financial mistakes in your younger years to set yourself up for a bright future.
- Spending too much on accommodation
Don’t spend too much buying a house you can’t afford. Whether you’re renting or buying, consider the initial and recurring prices, as well as the area you’re considering, as different suburbs have varying price tags. If you’re thinking about buying a house, get a complete breakdown of the taxes involved in property ownership.
- Living out of your means
Living within your means every month is the key to building healthy money habits. However, this would mean putting off spending money on things out of your budget. On the other hand, spending beyond your means makes it challenging to keep up with essential expenses such as bills and even food. In your 20s, build a habit of spending less. Although it may be difficult now, it would grant you financial freedom in the long run.
- Not keeping track of your finances
You’ll be more conscious of your spending patterns and what you’re doing with your money if you track your money. You may believe you’re being frugal and doing everything you can to save money, but when you look at the fine print, you’ll see that your daily latte, lunch outings, and happy hour beverages are costing you more than you can afford.
- Not setting financial goals
Building money and financial security is a long-term process that requires time and commitment. You’re just winging it if you don’t have a strategy, just like everything else in life. Setting financial objectives allows you to define the parameters of your budget and focus on certain tasks. You need to sit down and take a serious look at how to pay off debt, buy a new computer, save for a car, and put money away for retirement if you want to do so.
- Spending too much on flashy cars
You’ve landed your first good-paying job, and like many young people, it is time to pimp your ride. However, this may not be a good idea. Deciding to get a flashy car may be an expensive decision to make in your 20s as aspects such as maintenance, repairs, insurance, and other car-related expenses may be detrimental to your finances. Instead, consider exploring investment opportunities to grow your income. You’ll thank your 20-something self in the future!
- Not saving for retirement
You may never retire if you do not get your money to work for you in the markets or through other income-producing investments. Contributing to designated retirement accounts monthly is critical for a comfortable retirement. Make use of tax-advantaged retirement accounts. Recognise how long your investments will need to grow and how much risk you are willing to take. If feasible, get a knowledgeable financial counsellor’s advice to ensure that this is in line with your objectives.
