The years people spend in their twenties sets the foundation for their future financial life. While this sounds exciting, many people get themselves into financial trouble in their twenties because they are unaware of the complexities that come with personal finance. What are some common financial mistakes that people make in their twenties and how can you avoid them?
Taking on too much in Student Loans
Students understandably want to get good grades in their undergraduate careers. However, that does not mean that students can’t take on a part or even a full time job. The busier you are, the more focused and intentional your time is spent. When you don’t have a lot of it, you tend to manage it better. The other aspect of taking on too much student loan debt is the possibility of going into forbearance or default on student loans. This will slash your credit score and potentially even prevent you from getting a job as some employers run a credit check pre-hire.
No Emergency Fund
When you don’t have an emergency fund, you are putting a big target on your back. You should have at least six months of living expenses saved. If a medical emergency occurs or loss of a job, you will need this fund to rely on. Creating an emergency fund also helps to get you in the habit of consistently putting money away and not touching it.
Not Living Below Your Means
Many Americans struggle to live within their means, but twenty year olds need to learn to live below their means. You should not have bills that exceed your income. That allows no room for savings. If you make $2,000 a month, put $500 of that into savings. You will thank yourself later on.
Why is so critical to do these things? People will find themselves buried in debt and unable to buy a home because they have no savings and too much debt. Your twenties is the time to propel your future. If you stay out of student loan debt, and create a nest egg, you will be very thankful to yourself beyond your twenties!