If you’re reading this and you’re in your 20s, don’t turn away. We’re here to help you financially prepare for the priorities you probably have today (like traveling) and the priorities you also should have today (like saving for retirement).
Read on for five financial mistakes to avoid in your 20s.
1. You Don’t Look for the Best Travel Deals.
It can be easy to whisk away to another country when you don’t yet have the responsibilities of caring for a family or you aren’t plunking down cash on a house. If you’re someone who likes to travel, or you’re not yet sure but want to find out, don’t be afraid to go — just find those deals!
Sure, you’re tech-savvy, but when you’re first starting out as a globetrotter, you might not know where to look for the cheapest flights, hotels, rental cars, and more. Or maybe you have a dream of visiting an expensive city, but haven’t prioritized what you can afford today.
Two resources that help older adults quite often that you may not think about: AAA and a travel agent. You can use AAA not just as roadside assistance, if you drive a car, but also to get discounts on travel experiences. Additionally, when you talk to an actual human instead of doing everything via the internet, aka use a travel agent, you may discover savings you never knew you could. Travel agents are very skilled in their jobs, and their services typically are free when you book a trip through them. Try it!
2. You Don’t Invest.
If you just got your first job out of college and are hearing about 401(k)s for the first time, that’s totally normal. However, you don’t want to just dismiss all that paperwork on your first day because it’s overwhelming — especially if your employer “matches” any amount you put in. Talk to your benefits representative and get help on how to start contributing to your retirement plan now, or make a plan to contribute in 6 months when you feel a little more financially secure. Just don’t put it off forever.
If you don’t have a 401(k) through work, you should still consider investing in a personal retirement account. There are lots of apps out there that make it super easy to do this today. Stash, for instance, lets you pick your own investment portfolio through one-time or recurring purchases. You can match Warren Buffett for just $1 a month, with no trading fees. Want something a little more hands off? Try Wealthfront. Your first $10,000 is managed free, and if you open and contribute up to $5,500 in the first year of having your own IRA, you can write it off as a deduction on your taxes.
3. You Don’t Budget.
This one seems pretty simple, but many people think it’s too time-consuming. However you want to budget, you can choose the amount of time spent. Budgeting can include just setting aside an old-fashioned jar on top of your refrigerator as your “travel fund,” up to actual, detailed spreadsheet work.
One app that takes some of the pain away for you is Mint.com. With Mint, you connect all your bank and credit accounts, set up any property you own (such as a car), and choose what sort of things you want to save for: retirement, travel, buying a house, and more. You can also easily allot certain amounts each month to your expenses, like your cellphone bill or an estimated food budget, so you make sure you don’t spend too much dining out or on unwanted ATM fees.
Apps like this are a great way to monitor your finances, but also give you an overall view of how much money is coming in versus how much is going out, and what you might want to do next in your career to increase your income as you gain more work experience.
See also: Use Your Phone to Keep Your Wallet Happy: Best Personal Finance Apps
4. You Don’t Monitor Your Finances.
This goes along with budgeting, but is a definite no-brainer that takes minimal time. Many people in their 20s don’t use checkbooks, so they don’t balance them, either. We have Venmo, Paypal — everything is digital. That said, online banking makes it so easy to keep track of our finances, there’s no reason not to do it.
Make it a goal to check in on all your bank accounts (or just sign into something like Mint, which monitors everything for you) at least once or twice a month. Know what days you get your direct deposit? Check your accounts then to be sure everything came in correctly and monitor the expected health of your finances for the rest of the month.
There’s also no reason not to set up alerts on all of your accounts for when your balance gets too low, when you’re charged an ATM fee, when your credit card is charged a certain amount, or when you are nearing your credit limit. Speaking of credit limits, monitoring your finances also includes monitoring your credit report. The longer you have credit, the better your credit score will be, but be careful to not open up too many credit accounts and do not spend close to your limit.
Credit card debt is a biggie, and if you go overboard at a young age, you may be paying it off through your 40s unless you choose to file bankruptcy.
See also: High Rent? Here’s How to Use Those Payments to Improve Your Credit Score
5. You Don’t Refinance or Consolidate Your Student Loans.
Ah, student loans. Our nemesis. Did you think we’d forget about them here?
It can be hard to plan or budget for anything fun in life when you have the weight of 15 to 30 years of student loan payments on you. Depending on how much you took out, you could be paying off too little, or too much, every month. Did your job recently change? Your income increase? If you’re struggling with student loan payments, you can get on an income-based plan. Any extra you can throw toward your student loans each month is a true priority.
Make paying off student loan debt your No. 1 goal to hit before you turn 30. You’ll be so glad you did.
Get Help Today to Become Debt-Free
By now, you’ve probably realized that we here at Borowitz & Clark work with debt on a daily basis. Debt can be scary, but we can help. There are plenty of ways to get out of debt — bankruptcy is just one option. We can help determine if it’s right for you. Contact us today for a free debt evaluation.
Do you have any tips on what helped you get through your 20s and come out financially sound? Feel free to share with us in the comments!