Let’s face it, when we untether ourselves from our parents, we tend to go crazy. We have freedom! Most of the time, that freedom comes with being unprepared for the real world. We have access to credit cards and loans of all types. That’s the problem many young people face. They were never adequately prepared for this new financial life.
A lot of parents expect schools to teach about financial health, but even they don’t do a good job. The reality is, how well you do in your 20s can set you up for the rest of your life. Yet, if you make a lot of mistakes, you can end up paying on massive debts for decades to come. This can be one of the largest barriers you have towards gaining financial freedom.
Let’s take a look at several financial mistakes a lot of people make in their 20s they often regret:
Financial Mistake #1: Living on their Student Debt
When you’re a late-teen or in your 20s, taking out student loans is easy. Many people sign on the dotted line without questioning whether it’ll become a problem later. And it will be a problem later. You see all the presidential candidates trying to wipe out student loan debt as it reaches $1.56 trillion. They also want to make college free. That’s because this kind of debt causes massive problems.
Many people decide to live off their student loans while going to college. It’s better than getting a job and only borrowing what they need. But student loan debt is causing people to put off making major life decisions. That’s because this debt sticks with them for a decade or longer after they graduate. Imagine spending the next 10-20 years of your life, paying on mostly interest. That’s what happens and many now wonder if going to college was worth it in the end.
Financial Mistake #2: Not Taking Care of Your Credit Score
It can be easy to get into a place where you borrow money, but fail to pay it back. Many young people fail to see how important it is to pay their bills on time, every month. They get caught up in the temptation of wanting to buy something or by having credit cards. But by neglecting your credit score, you set yourself up for failure later in life.
Potential employers can look at your credit score. So will future landlords. If you need a new vehicle or want to move into an apartment…credit score. Need emergency cash or want lower monthly insurance rates? Yes, you guessed it, credit score. The difference between having a good and a bad credit score can be hundreds per month. Don’t take it for granted!
Financial Mistake #3: Not Saving Money
Younger people tend to not be as careful as those who are older. That’s because older people have a lifetime of experiences they’ve learned from. Younger people don’t worry about saving. Retirement is barely in the back of their mind. If an emergency happens, then most young people still have their parents to lean on.
This is a major mistake. When you’re young, you should be saving money. As you get into your thirties, you’ll start to learn that the economy has cycles. Times might be good right now, but they haven’t always been. A recession will come. Your parents won’t always have the money they do now. When someone bad happens, you’ll have to rely on yourself to get by. This is especially true when you start to have a family. Start saving when you’re young!
