It can only take a couple of financial mistakes in your early adult years to suffer for almost a lifetime.
Starting out smart and avoiding money mistakes is essential. If you get on the right path from the beginning, it will make a big difference over the coming years.
Goals are so important
It is dangerous to dismiss your financial future when you are in your twenties. This can be a huge mistake, as this is when you set the tone for your financial health for the rest of your life.
One of the most important mistakes is the failure to set clear financial goals. You might not know exactly where you want to be in ten or twenty years time, but if you just drift along it is not going to get you very far.
Work on setting some basic financial goals like buying a home at some point, getting a new car, even setting up a retirement fund. At least if you have a basic plan of action to work to, it is much better than having no focus or goal.
Think before you sign
It might feel good when you are offered a credit card, but before you sign on the dotted line, take a minute to decide if you need to amass any credit card debt.
Using credit cards responsibly is fine. Paying off the balance when the statement comes in is responsible and helps you build a credit profile. You might even qualify for rewards that are worth having, like air miles.
The problems occur when you leave a monthly balance outstanding. Finance charges, late fees, these all take their toll. Consider the fact that that credit card debt accounts for nearly half of all bankruptcies.
Think before you sign, especially if you can manage without a credit card or might struggle to pay off the balance each month. Signing up for a card could be costly.
Something in reserve
Starting out as an adult, your finances aren’t likely to be that strong at first. Your attitude might also be that nothing bad is likely to happen to you. Unfortunately, unexpected and bad things can and do happen to most people.
Young adults are often tempted by their peers to take unnecessary risks, some of which border criminal activities. Even unsuspectingly being at a party where illicit drug use is taking place can wind you up on the wrong side of the law. You never know when you might need professionals like Powers McCartan PLLC to defend you.
You can’t predict when your car might break down and you might even lose your job unexpectedly.
These are all reasons why having an emergency fund is such a good idea. Try to put a small amount of money away into savings each month. This will give you access to some spare cash when you need it. Without this financial safety net, you could end up resorting to costly borrowing options.
Having it all
We live in a world of consumerism. Flat screen TV’s, luxury cars, and holidays, all seem to be within reach at a whim. Financial overindulgence will end up costing you. Even interest-free credit options involve a financial commitment. Think about whether you really want to sign up for a buy now pay later option.
The overall cost to your monthly finances can soon turn into a burden. Aspire to enjoy lavish holidays and fast cars, but beware counting the cost of trying to have it all.
Talk about money
One of the biggest reasons why people divorce is money. Start off by discussing your main priorities in your relationship. Openly discuss your finances with each other.
You can work together to create financial goals and work on a savings plan. It doesn’t mean you have to share your money together, but talking about it will help avoid conflict and misunderstandings.
The cost of your big day
If you plan to get married, be careful about overspending on your wedding.
It is an interesting statistic that women who spent at least $20,000 on their wedding are three times more likely to get divorced. This is when compared to women who spent a more modest sum of up to $10,000 in total.
Starting your life together with a large debt is not a good idea. Think about the cost of your big day and decide if it really matters if you spend less.
There are many people who hit their forties, or even later, before realizing that their retirement plans are inadequate. Thinking about retirement in your twenties seems crazy but starting early really pays off. Investing a small amount each month in the early years makes a huge difference to your retirement goals and plans.
Starting out smart with money will help to avoid some of the biggest mistakes.
Niles McCann is a personal finance consultant. He shares his advice online through social media, forums as well as his articles which appear on a selection of blogs.