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If you’re in your 20s, you are likely already committed these 4 money mistakes.
I still remember in my 20s having zero thoughts about the future. All I cared about was today. I was working and had money I fully intended to enjoy over the weekend.
Years went by, and into my 30s, I watched more and more of my friends get married and start families. That’s when I looked at myself and realized I had no savings and was living paycheck to paycheck.
The only thing I had going for me was that I had no health issues.
So, if you’re in your 20s or even early 30s, I want you to recognize these money mistakes and start taking action.
Now, let’s dive in.
1. No Budgeting & Financial Planning
One of the biggest money mistakes is not knowing your numbers and what you want to achieve in life.
Do you know your take-home pay? How much of your income is taken up by essential expenses (e.g., rental/mortgage, groceries, utility, mobile, insurance, etc.)? And how much is taken up by nonessential stuff?
What do you want to achieve in life? What sort of lifestyle do you want for yourself and your family? When do you intend to retire, and what kind of lifestyle do you want then?
Do you know the answer to all of the above questions?
The rich know their numbers and what they want to achieve, and they act on it. They understand the value of time and know they must make sacrifices today to get what they want tomorrow.
That’s why they are rich.
2. Overspending on Credit Cards
Spending your future income today is the quickest way to bankruptcy.
The more you spend your future income, the less you have to save and tide over emergencies, handle unexpected expenses, and invest for the future. Moreover, in your 20s, you’re likely only to have one source of income: your job.
But, look at the job market this year:
- Citi Group is cutting 20,000
- Tesla is cutting about 14,000
- UPS is cutting 12,000
And many more are cutting jobs worldwide. Once again, companies have shown that you’re nothing more than a number on their spreadsheets and will not hesitate to cut you off.
So, unless you have another source of income besides your job or a big fat investment portfolio, a job loss will effectively put you into bankruptcy.
3. Taking Out Loans For Nonessential Expenses
One of the worst money mistakes you can make is putting yourself deep into debt just because you want to drive a new fancy car, have a fancy wedding, and live in a fancy home.
What’s wrong with a used car—a Honda or a Toyota? What’s wrong with a simple wedding and living in an average home
Experian Automotive did a study in 2022 and found that 61% of the wealthy (household income > $250k) do not drive luxury cars. The top 3 cars driven were Toyota, Honda, and Ford.
Work the numbers out, and you’ll see how much you could have set aside for savings and investment and how much your investment portfolio would’ve grown over a 10 – 20-year period.
The rich are rich because they do not live an expensive lifestyle. They would rather save and invest that money. And if you need to take excessive loans to live the lifestyle you have today, you can’t afford it.
The sacrifices you make today, the pain of not being able to fully enjoy the luxuries life has to offer, are only temporary.
But the sacrifices you don’t make today could take years, or even a decade, to reverse the damages done to your financial health.
4. Not Saving for Emergencies And Unexpected Expenses
Taking on excessive loans, overspending on credit cards, and chasing a lifestyle you can’t afford, no wonder you couldn’t save for emergencies and unexpected expenses.
Add to the fact that companies can easily fire you anytime the market isn’t going well. And without any funds to tide you over, you’ll have no choice but to either declare bankruptcy or take out even more loans (e.g., personal or payday loans) to pay for it.
All the decisions you’ve made have led you here.
Will you keep this going, or will you finally decide enough is enough?
Wake Up Now, Choose The Future You Want, And Act On It Now
It’s time to put a stop to the bad money mistakes you’ve been making all this while.
It’s time to know your numbers and work out a plan to achieve what you want in life.
Recognize what’s holding you back today, make the sacrifices necessary to resolve the problems, and relentlessly strive to reach your goals. Life isn’t just about the present but also your future.
As Warren Buffett once said: “Someone’s sitting in the shade today because someone planted a tree a long time ago.”
I wish you well on your upcoming grueling journey forward.
