For many people in their young 20s, financial responsibility comes hard and fast.
You’ve completed college and may have student loan debt. You may have just moved out of your parents’ house and have rent and other bills to pay. You may have obtained your first full-time job and aren’t sure where to begin your budget. While there are many paths to take when it comes to making your financial future successful, there are definitely mistakes you should always avoid, too.
Obtaining Additional Education with No Plan
While we should always be on the path to learning, Masters programs can be very expensive and can drastically increase student loan debt. Do your research before applying and jumping into another degree. If you plan to continue your education, look for opportunities like grad assistantships or scholarships to lighten your tuition load.
Paying your Bills Late
While you may have been able to convince your professor to extend a deadline or let an assignment slide, companies are not as generous when it comes to paying bills. Many times additional fees can be added, or it can even hurt your credit score. We suggest setting up automated payments or consistent phone reminders so you never miss a bill or a deadline.
Living without an Emergency Fund
Emergencies can happen to anyone. Whether a medical need, a home improvement, or even a speeding ticket citation, it’s important to reserve an amount of money in your savings account that can get you out of a jam. It’s never ideal, but you’ll be glad to have cushion should something unplanned happen.
Foregoing Retirement Options
You’re probably thinking “I just started working full time. Why should I even be thinking about retirement?” The truth is it can never be too early to begin savings. Many employers match a percentage of what you put into your own retirement, which means free money. Consider starting small and increasing the amount yearly as promotions and raises come about. Your future self will thank you later.
Spending More than you are Earning
Once you’re in charge of all your spending, it can be tough to say no to shiny new things. However, one thing is certain: you should never spend more than you earn. This can lead to overdrawing on your bank account, outrageous interest fees on unpaid credit cards, or even inability to pay a car or house note. Be realistic with yourself in what you currently make and spend. Set a budget, and stick to it.