In this post I will go over the 5 Financial Mistakes Not To Make At 20. Avoid these 5 things and you’ll be happy not to deal with it later in life. Getting knowledgeable in personal finance early on will help form good habits and be ahead.
Side Note: Sorry that I haven’t posted in a while. I have been focus on growing a social presence for The Finance Starter that posting was the last thing to do.
Let’s get right into it..
1) Not Saving Money
Not saving money will always be the biggest challenge for everyone. It is something that seems impossible to do for a lot of people. They prefer to spend in budget with how much they make a week, bi-weekly, or monthly. There is no money left over because all of it is supporting their lifestyle.
I once heard about a person that make really good money, drove nice cars, nice house, nice school for kids, etc. Want to guess how much they had left over? None… This person would match expenses to how much the check was. Then a sudden change happened at work that affected the paycheck heavily. How does this person adjust everything? You can’t. Debt will start to creep up and all the nice stuff will start to disappear.
Do not Be this kind of person! And if you are and reading this post then please change what you are doing right now. That lifestyle will not last and only be short term. If you think otherwise, then someone has taught you everything wrong.
At 20 years old, you should have no PROBLEM saving money.
2) Not Investing Money
For as long as this blog is still running I will always be preaching about the need to invest at a young age. At 20 years old you should have over $100 and growing in some type of stocks. The prefered way is in ETF’s at the start and then start investing into dividend stocks. You want to take advantage of compound interest and the younger you are, the more your money will grow. Another plus you have is the ability to invest by yourself with apps like Robinhood or have an app like Acorns break up the money invested into fractional shares.
All it takes is investing a little bit every month or week and you’ll see how fast it is to save and invest money with the power of habit. You are not going to make lots of money in a few years, but long term you will. Don’t be that person in 20 years that is telling another young kid about the benefits of saving money. And if you’re not into reading blogs about personal finance then go onto YouTube and find videos on personal finance.
3) Not Learning About Personal Finance
Don’t expect to just throw your money in stocks and get rich, open a savings account with any bank and accumulate lots of money, or opening a credit without research. You need to take the time to search the web, read articles, watch videos, or taking classes on personal finance. In turn you will better understand the value of learning to save money and how to make it work for you.
What to know the secret to how some people are millionaires besides the ones that start companies? Making great investments and understanding the value of personal finance. This subject shouldn’t be boring to learn about because it’s your money and you probably don’t want to live life always struggling.
You need to think in 20 years from now I want to be able to live a comfortable life without the worries that a lot of people go through on a daily. When getting older, you are going to hear about income inequality or how people are most likely going to die in the same income class they were born in. Well that is true, you have the opportunity to take advantage of the things that people do with money. It all starts with having a deep understanding about personal finance.
4) Buying On Impulse
This is yet another thing that everyone seems to struggle so much with (and yes I am also guilty of it). You see that really cool product that you have always wanted and now have the money to afford it. The next thing that goes through your head is “I must get it because it’s what I’ve always wanted and will use it all the time”. So you end of buying that product and later end of telling yourself “why did I buy this”. These urges stem of what you were craving as a young kid and you now buy on impulse because the money is there. Number 4 is what makes you ignore the other three mistakes not to make.
A lot of smart people suggest that to combat this problem you need to give yourself 48 hours to think about. This will give you the time to come terms if the product is worth it or you can live without it. If you talk to an Econ (Economist) he/she will tell you to look at the opportunity cost. If you buy that product, what will you be missing out on if you didn’t buy it. both ways interconnect and will help you make better decisions when buying anything. And opening a credit card (without the idea of building credit) doesn’t help either because you will think “oh I can just pay the product off later” in which you forget and here comes interest knocking at the door.
Learn to fight the urges at a young age and you will be thankful years from now when.
5) Not Taking Risk
You are a young 20 year old that has so much life ahead of you. This is the best time to live a little. Follow your interest, make money, save money, fail a little, learn from those mistakes, and be a successful person. Always live to create memories, but be mindful of long lasting impacts. Don’t go throwing all your money all in one basket.
All of that said is from what I have been told and from reading. I am a young adult just like you and this blog is my risk and interest. I want to be really knowledgeable in personal finance, create a blog around it, start other ventures, and enjoy this journey. And yes trying to establish a really good habit is super hard, but if you listen to people like Jocko Willink or David Goggins, these both men will simply say to get up and get to work. Get in the right mindset and you change your life around. It applies to anything you want to do.
I hope that this post was informative and you learned something today. Share this post with someone that needs to learn about personal finance. Thanks for supporting The Finance Starter and make sure to read other post on the blog below.