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14 Major Money Mistakes People Make in Their 20s (and How to Avoid Them)
Your 20s are a time of discovery, growth, and learning. Unfortunately, they can also be filled with financial mistakes that have long-term consequences. Here are 14 common money missteps to avoid, ensuring you set yourself up for financial success in the future.
1. Underspending on Education, Overspending on Status
Many young people in their 20s focus on showing off status rather than investing in their future. Scrolling through Instagram, you’ll see people flaunting flashy cars and luxury watches, often without the financial backing to support such spending. The key? Don’t spend money to impress others—invest in your education and skills. These are the true sources of future wealth.
2. Choosing Jobs for Earnings, Not Learning
In your 20s, it's not about how much you make but how much you learn. Many people chase jobs offering slightly higher pay but miss out on the valuable learning experiences. Early in your career, prioritize jobs that help you develop new skills, not just pay the bills.
3. Saving Money Instead of Investing in Yourself
While saving money is a good habit, in your 20s, it’s more important to invest in yourself. Rather than letting money sit in a bank, use it to improve your skills or start a side business. You may save a small amount now, but the real returns come when you use that money to increase your future earning potential.
4. Spending Before You Invest
Always prioritize investing in yourself before spending on luxuries. Set aside a portion of your income for personal development before splurging on non-essential items. This ensures you’re continuously improving your ability to earn.
5. Automate Investing, Manualize Spending
Make it easy to invest in your future and harder to waste money. Automate your savings and investment contributions, while making the spending process more deliberate. This simple habit helps keep your finances on track.
6. Shopping Without a Plan
Aimless shopping leads to wasted money. Stick to pre-approved lists based on your budget, and avoid spontaneous purchases. This habit will help you save more and avoid buyer’s remorse.
7. Cooking When You Should Be Working
It might sound counterintuitive, but once you’re making more than $15 an hour, getting takeout can save you time and money. If meal prep eats into your productive hours, it’s better to spend that time earning or investing in personal growth.
8. Living With the Wrong People
Roommates can make or break your 20s. Avoid living with people who don’t share your financial and life goals, as they may drag you down. Instead, surround yourself with like-minded individuals who encourage your ambitions.
9. Ignoring Your Micro-Community
Living in a convenient, supportive environment is crucial. Being close to gyms, restaurants, and highways saves time and energy, freeing you to focus on personal growth. Sometimes, it’s worth paying a bit more for a better location that supports your lifestyle.
10. Modeling the Wrong Season of Life
It’s easy to look at successful people and try to emulate their current lifestyle. However, in your 20s, focus on the steps they took to get there, not the flashy results. You need to build your foundation first before jumping into luxuries.
11. Not Measuring Time in Money
Think about how long it takes you to earn what you spend. If a $100 shirt takes six hours of work, ask yourself if it’s worth that time. By measuring money in terms of time, you’ll make more thoughtful spending decisions.
12. Competing on Spending, Not Saving
Don’t fall into the trap of competing with friends on who makes or spends more. Instead, focus on how much you can save and invest each month. This habit will build your financial security over time.
13. Ignoring Your Bank Account
Check your bank account every morning. It might be uncomfortable at first, but regularly monitoring your finances helps you stay on track. Knowing where your money is going can improve your financial habits, just like regularly checking your weight can help you lose it.
14. Missing Out on Once-in-a-Lifetime Experiences
While it’s important to save, don’t forget to live. Some experiences, like traveling when you're young, are worth the investment. You won’t be able to take advantage of these opportunities later in life, so it’s okay to occasionally spend money on meaningful, once-in-a-lifetime experiences.
In conclusion, avoiding these 14 mistakes can set you up for long-term success. Your 20s are the perfect time to invest in yourself, learn valuable skills, and build a financial foundation that will benefit you for decades to come.
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