by Natasha Gabrielle | Published on Sept. 16, 2021
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Making big money mistakes early in life can negatively impact your future.
It's easy to make mistakes in your 20s. After all, you're still growing and learning. Unfortunately, many people in their 20s make poor financial choices. And these wrong money moves can have a lasting impact on many areas of your life. Here are some common money mistakes made by people in their 20s. If you're a young reader looking for advice, learn from these mistakes.
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Credit card debt is an issue that many people face. While credit card balances decreased during the pandemic in 2020, many consumers still managed to rack up these high-interest charges. According to Experian, the average credit card debt for Gen Z consumers (18-23) in 2020 was $1,963. For millenials (24-39), the average debt was much higher at $4,322.
If you're not careful, credit card debt can quickly get out of control. When using your credit cards, make sure that you're making responsible choices. Only charge what you can afford to pay off in full every month. Otherwise, expensive credit card interest will accumulate.
If you have credit card debt, this credit card payoff calculator can help you calculate interest and sort out a debt payoff plan.
Building up a savings is a must, especially since you never know when an emergency will occur. By having extra money set aside as an emergency fund, you can pay for unexpected expenses without feeling stressed. Without savings, you may make choices that put you into debt.
Do yourself a favor and open up a savings account. Setting aside as much as $100 a month will result in $1,200 saved after a year. Set up automatic withdrawals, so you don't forget to save. This way, when you need to access extra funds, the money will be there.
Instead, you should apply for a rewards credit card. You can use your card to responsibly build credit, get extra perks, earn rewards on your spending, and have built-in protection from credit card fraud.
If that's not enough to convince you, this story about a woman who was accidentally charged $5,700 for a latte will have you putting your debit card away for good.
Many young people don't take the time to budget. Instead, they spend now and worry about their finances later. Creating and following a budget is a smart idea. By doing this, you can better outline how you plan to spend your money each month, minimize unnecessary spending, and reach your money goals faster.
If you're in a tough financial spot or are prioritizing saving and paying off debt, don't be afraid to be vocal about it. Your friends may not have the same money goals as you. If you're invited to expensive activities or events that fall outside of your budget, be open and upfront.
Don't give in because of guilt or embarrassment. Instead, suggest other low-cost or free activities to do together. It's possible to have fun with the people you love without going into debt or spending more than you can comfortably afford.
If you're able to increase your income, you'll have an easier time saving more money. Many people in their 20s take jobs offered to them without negotiating their pay or benefits. This is a mistake, as you may be able to increase your salary just by asking during the hiring process.
Even if you're unable to get a salary increase, try asking for more benefits. Good benefits can improve your quality of life. If you're thinking of looking for a new job, here's a helpful guide about salary negotiations. And if you're in a position that you love but think you deserve more money, these pointers may help you negotiate a raise.
These money mistakes can create significant financial problems. But avoiding them in your 20s can help you set yourself up for better financial success. For more advice, check out these personal finance resources.
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