Your 20s are an interesting time.
It is when most of us are able to start earning a decent pay check for the first time in our lives and take on major financial responsibilities such as debt. While it is really exciting (Especially the whole full-time salary part!), it can also be scary and overwhelming.
As a member of the 20s community, here are some mistakes to avoid. I’ve made a lot of these mistakes myself but also seen it affect my friends and peers.
1. Living Beyond Your Means
It is really tempting to go into debt in your 20s.
It’s often the first time you are really allowed to take on a line of credit. You want to travel and make memories while you’re young, keep up with the latest trends, look your best and have a nice vehicle. All, which cost money. Just remember that while it is important to go out and have fun, a balance is really important. If you are perfectly happy with your current old car or living in a share house – don’t increase your expenses just because you earn more money.
If you keep inflating your lifestyle, you will struggle to save, invest and achieve other financial goals.
2. Not investing until later in life
Are you someone who has thought they would “invest eventually” when they’re older?
If you have the means and it aligns with your goals – do it now! Don’t put off saving and investing as a “future me” problem. The reason for this is that time in the market is one of the most financial moves that you can make.
Okay, but what does this mean?
Basically, just buying stocks early and letting them sit in your portfolio for years can help you build significant wealth. For example, If you started investing at 40 versus your 20s, you’d have to invest eight times as much to have a similar portfolio value. You can check out my article with all the graphs and sources here.
3. Buying an expensive vehicle
Expensive cars can honestly kill your financial situation.
Especially when you’re in your 20s with a lower income. Just because you can afford your dream car doesn’t mean you should get it. While this includes things like a car loan, it also include maintenance and other associated costs. I discussed a real life case study about one of my friends who bought a $20,000 car at 19 – you can read all about it here (hint: wasn’t a good idea!).
4. Not learning how to cook
Look, I know not everyone enjoys cooking.
But, eating out everyday can really kill your wallet long-term. Forbes found that it is five times more expensive to order delivery from a restaurant than it is to cook at home. And if you’re using a meal kit service, it’s a bit more affordable, but still almost three times as expensive as cooking from scratch. You can check out the full article here.
Here are some of my tips as someone who cooks nearly everyday:
- Freeze several different ingredients so you have them ready to go. I have beef, chicken, seafood, veggies all sorts of things frozen. It’s hard to justify ordering a meal when you already have the ingredients at home. You also have reduced food waste.
- Figure out your top 3 favourite dishes and learn to make them really well – you’ll start craving your own home-cooked meals!
- Open your food delivery app, decide what you want to eat…and then cook it! This is something I’ve been doing a lot lately. I’ll choose what I want to eat on UberEats and then google the best recipe and make it. Weird tip, but works for me!
5. Not setting financial goals
If you don’t have any financial goals – please get a pen and paper out to write them down. Even something simple like “Millionaire at 35” or “Save $50,000 for a house deposit”.
The reason for this is, simply writing your goals out will make you more successful. According to a Harvard Business Study:
- 83% of the population does not have goals
- 14% have a plan in mind, but are unwritten goals
- 3% have goals written down
- The 14% who have goals are 10 times more successful than those without!
6. Telling yourself that “you’ll work it out in the future”
“That’s a future me problem.”
I’ve seen this mentality a lot when young people take out debt. It can be easy to tell yourself that it’s okay to overspend or make poor financial decisions because you can “just make more money in the future”.
However, decisions that are seemingly small now can compound and affect you significantly in the future. This could be debt that has spiralled out of control, poor money habits that are difficult to break or a very inflated lifestyle.
7. Not taking career risks
Your 20s are a time where you can be selfish and spend time figuring out your career path. Don’t be afraid to go to that networking meeting, take that job offer or even learn a new skill.
And at the end of the day, it is all about maintaining a balance. Yes, you could live with your parents until the age of 35 to save on rent. However, the independence you gain from moving out is significantly more valuable than the money you save.
Similarly, spending money on your physical and mental health, as well as self-development is always worth more than the money itself. It is up to you to decide what your personal goals and priorities are.