Your 20’s are the decade when you get to figure out your life and learn from your mistakes. It is also the decade when you can put yourself ahead of the game and set yourself up for a lifetime of financial success. Money impacts all areas of our lives, so planting the seeds now will make every decision down the line a lot easier. Would you rather spend your 20’s making mistakes that will make your 30’s and beyond HARDER, or spend these years paving your path to financial security? It’s a no brainer for me!

 10 Money Mistakes to Avoid

1. Spending more than (or as much as) you make

Living beyond your means isn’t sustainable, but it is something we excuse in our 20’s. YOLO is not the answer; neither is keeping up with the Jones’. If you are raking up credit card debt, spending 60% of your paycheck on rent, or find yourself breaking even each month, then it is time to take a step back.

2. Not setting financial goals

Building wealth doesn’t happen magically or overnight; it takes time and effort. Having clear, specific, and measurable financial goals give you the parameters you need to build a spending plan and work towards something. If you are just winging it, then you’ll be running in circles forever.

3. Paying off the wrong debts first

You probably think just paying off debt is a good thing (it is!) but there is a method to the madness that will actually boost your financial situation. Any debt that doesn’t boost your financial situation (pretty much all of it) needs to go first. Think: credit card debt, car loans, bank loans. The highest interest rate needs to go first and FAST.

4. Not tracking your finances

Tracking your expenses brings awareness to where everything is going. Without doing this, I can GUARANTEE you are spending more than you think; it happens 100% of the time. Keeping track of your expenses may feel tedious, but it is the easiest way to keep yourself on track. So just do it.

5. Not having a fully funded emergency fund

Emergencies can happen to anyone at any time; we can’t always foresee them coming and they can really set us back if we aren’t prepared. A fully funded emergency fund is 6 months of expenses sitting in a savings account (ideally high-yield) that you can access at any time (this is ~$10k depending where you live!). Prioritizing debt payments or another financial goal ahead of having an emergency fund is quite common, and it often results in accumulating even more debt because emergencies are inevitable.

6. Telling yourself financial lies

Do you try to make yourself feel better about your current financial situation? Do you avoid looking at your bank account, or tell yourself that when you get a raise or a new job you’ll be better? This is self-sabotage; start taking an honest look at where you are at and what you are doing.

7. Putting off saving for retirement

Retirement is pretty far away, but it shouldn’t be overlooked. If you don’t want to work forever, you need to have a retirement account in your 20’s. The earlier you start, the more potential your money has to grow due to compound interest. For example, if you contribute $6,000 to a retirement account starting at age 25 and retire at age 70, you’ll have almost $2 million. But if you start 10 years later at 35? That number goes down to $900K. THATS A MILLION DOLLARS LESS! Just for waiting 10 years. Start now.

8. Using credit cards incorrectly

Credit cards can be a tool to BOOST your financial situation if used properly. You should only ever use a credit card if you already have the money sitting in your account. Many millennials fear credit cards, but without credit it can be really hard to make big life purchases, like a home. So use them, but only on things you need, and pay it off right away.

9. Not building good credit

A good credit score can help you save money and open doors down the line. Want to buy a house? You need to get approved for a mortgage (unless you’re paying cash). Can’t do that without a credit score! As mentioned above, credit cards can help you when used properly.

10. Not having a financial plan

This is the last and most important of all. A plan allows you to save money for goals you don’t even know you have yet. Life is expensive and comes at you fast. Plan for it! Lucky for you, I have an incredible Personal Finance Dashboard that has totally changed the game when it comes to financial planning and managing your own money.

In Closing

If you find yourself making these mistakes, don’t worry- it is NEVER too late to take financial control back. Take inventory of where you’re at right now, and then go one step at a time. I offer a variety of products and services to help you take control of your finances, so click here to check them out!

xx

Michela