10 Worst Money Mistakes to Make in Your 20s

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While I was traveling, minding my own business and thinking of where to get money to buy that ticket for another vacation escapade, I read a quote written conspicuously on a big sign along the road, a line attributed to Bill Gates: “If you are born poor it’s not your mistake. But if you die poor it’s your mistake.”

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It didn’t at first, but later on the message sunk in and I began thinking about my bank statements. I was dead broke, no money saved, just incurred debt instead, and this was an epiphany. I needed to do something about my finances and stop being so casual about it – because it’s not too late, I’m still in my 20s, right? But I needed to be honest about the money mistakes I’d made. Perhaps my peers do, too, if we want to build better financial lives, so here’s 10 ideas to help savings become the cornerstone of your money matters that actually make your life better at the same time.

  1. Using Cash With a Little Too Much Spontaneity

We always see it on our social newsfeeds, friends posting vacation pictures and new purchases and weekend parties – the stuff we want to be doing too. Sorry to burst your bubble, but unless you’re a wealthy professional making a 5-figure monthly income, you probably have more time than money. It can be motivating to see what others are doing so that you can set goals for yourself – and being spontaneous is a healthy thing too – but not if you can’t control your spending. Pay your bills first, bottom line, and find creative ways to work those little extras into your life until you can afford to do more.

Best tip: Your time really is your money, so look at ways to have that time work for you by choosing experiences rather than purchases.

  1. Lack of Savings

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So it’s your first real job, you don’t have a mortgage or a family to support, and you’re too young to save for emergencies or retirement! Wait, no, not really. The more you can save in your younger years, the more that money works for you later – without you needing to even think about it. If you’re in the habit of spending freely, you probably justify those expenses as “rewards” for your hard work. And you’re right! That’s why you should be protecting those rewards as assets and not spending them on a Friday night.

Best tip: How you approach this is just as much about emotion as it is about money. It may be hard at first to pass up outings or decline invitations when your friends or co-workers are all headed out, but it doesn’t have to be all-or-nothing either. Let’s face it, they do the exact same thing every weekend, usually at the exact same places. So start out by joining them once a month instead of every week, and that’s likely to create some real savings without you missing much. Try some alternatives, like host a party with a potluck dinner or a holiday-inspired service opportunity. Fun and money aren’t the same thing, and there’s lots of ways to have the former without the latter.

  1. Buying Name-Brand Things

Not all necessary things are expensive, and not all expensive things are necessary. That’s true of Lacoste, D&G and DKNY, and you don’t need the labels to be well dressed. It’s not about the brand, it’s how you wear your clothes that matters. Yes, it’s important to have professional attire that helps to land or keep a job, and nearly everyone likes the feel of one special pair of shoes or a sharp-looking accessory. What this means is that you are free to plan your wardrobe – not just wander around with armloads of retail therapy items in the dressing room – and to shop sales to get those pieces.

Best tip ever: If it’s brand name goods you want, visit secondhand stores, and consignment or vintage shops likely to carry them. The treasures are everywhere, and high-quality items that someone never wore or didn’t like sometimes still have the tags on them. They need homes so “rescue” that name-brand sweater for just a dollar or two, and give it a new life!

  1. Not Staying in the Budget

Have we been talking about money this long without talking about a budget? OK, we need to talk about budgets and planning, because they’re not just necessary for managing your financial life – they’re also the best strategy for making sure you do get to the movies or go on vacation. There are so many financial planning tech tools out now, it’s almost as easy to manage a budget as it was to swipe your credit card without thinking.

The difference is, you know what you’re doing and that’s kind of what the real epiphany I had is about. Without a budget, you don’t know how far your pay will really go – and you know even less about where it goes, right? So you know how, at work or with your family, it feels so important at this age to be confident about all that adulting, and to know what we’re doing?

That’s what budgets do, period. Once you understand how your money is working in your life, and what apps or other products are out there to help, you are in control! You know what needs to happen, you know how to make it happen, and you know what needs to change in order to make some smart savings choices.

Best budget tip ever: Pay yourself first, and have your savings be as important as your phone bill and your rent.

Second best budget tip ever: Please, please put fun in your budget too. It’s not realistic that you’ll never go out for drinks, or say yes to that friend who wants to go to the movies, right now, or see a great deal on earrings. Set yourself up for success, and make sure you have a little bit of mad money too!

  1. Accumulating Credit Cards

03You need to learn how to deal with your credit cards, because now is the time for you to establish your credit reputation – and that means you need credit cards! But you don’t need more than one or two credit cards, and the fact that you have them doesn’t mean you have to use them all the time because you see, well, shiny things. Yes, you can swipe and swipe and hit your limit, start missing payments, and find yourself on a debt treadmill that damn near ruins your life. No, you don’t have to do this, and the reality is that most people don’t.

Best tip: Go back and look at the budget again. The credit card in your wallet is a tool in service to that budget, and that can mean different things – including a requirement when traveling and trying to book a hotel room or rental car, certainly as an option in case of emergency.

If you control your credit card instead of it controlling you, it’s your tool for achieving your goals. Your goal is to save, so keep it in line with that.

  1. Renting or Buying a Bigger Space Than You Need

It’s a new experience to make that first home for yourself, and it will never be new again – so yes, it is special to create a new space that reflects your own identity and interests, rather than just a place where you keep your stuff. That’s not the same thing as too expensive, although in some cities I can hear you laughing from here! But smaller spaces aren’t just less costly, they’re usually more sustainable and better for the environment too.

The important thing is to understand what you can afford based on your income, and there are already rules of thumb for that when you set up a budget and check out financial tips and tools.

Best tip: If you’re serious about saving, you’re going to be home more. You’ll discover that’s not punishment and you actually prefer it – so you want it to be a welcoming place to be, even if you’re dealing with iffy neighborhoods or roommates. But that doesn’t mean spending more than you can afford for features you don’t really need, or to live in a trendy neighborhood that makes no sense for commuting to your job or gym, just to impress people who don’t live with you anyway. Be sure to consider other expenses – maintenance, taxes and more – if you’re in a position to buy that first home instead of renting one.

  1. Buying That Latest Phone

OK, shiny things again. How exactly does that new phone help you achieve your savings goals – or any other financial goals you have? If it doesn’t, just say no. You probably already have the connectivity you really need and there’s no reason to upgrade just because everyone else is. On the other hand, maybe a new phone really does help you meet your money targets if you need certain apps to keep up with sales calls, or need to be reliable and professional with an old phone you can’t trust.

Best tip: Avoid expensive phones and plans that fail to deliver value, and define the value you want here as the good-enough experience that helps you save money. Be sure to check all your options – including what your employer may be willing to do, if you’re often on call or other work-related phone things. Decide on what makes sense for you, not what other people will see when that ringtone in the bar is still that same old phone you’re using. Plus, old electronics have to go somewhere, so be green and use them for as long as it makes that sense for you.

  1. Networking Scam

04Smart savers avoid all scams, usually because they’re in it for the long term and not looking for immediate gratification or the quick fix. They’re used to having a plan, and working their program for that, so they’re not distracted by new information that promises what, usually, it can’t deliver. There are plenty of legitimate networking options, but the keyword here is legitimate.

Best tip: Whatever your life goals or needs, no one – I repeat, no one – is ever going to care about them the same way you do. Financial planners, legal counsel, health care professionals and more are only as good as the decisions you make, that they then apply expertise to. Networking that you invest yourself in, whether social or professional, is going to have the meaning that only you can create, so save the money you may have given to someone else to do it for you unless you have a really good reason.

  1. Spending All Your Savings on Your Wedding and Honeymoon

OK, this is really hard, because I want to tell you to make this magical and make all your dreams come true: destination wedding, exotic locales for a honeymoon, the only rings or flower or photographer or venue that will do.

That’s what I want to tell you, but the reality is that you have that entire new lifetime that you’re celebrating to make those kinds of dreams happen – instead of paying the bills for one special day. Don’t make it less special, just make it less expensive and still personal. There are so many creative ways to do this that you’ll probably spend more time sifting through the ideas than you ever thought about, so maybe you should budget the time too!

Best tip: Assess your financial situation with your partner, and make this about what you both want. Remember, you’re sharing this day with family and friends, not answering to them about what you want it to be. Then create the experience that honors your mother, your best friend from college, and all your other guests – but more important, honors your love, your commitment, and the future you envision together.

  1. Not Using Money Coupons and Discounts

You don’t know what you’re missing if you ignore coupons and instead of using them, you disregard them. But the secret to saving with these kinds of incentives is to make sure you’re systematic about using them, and choosing wisely when you do. A coupon for half-price dinners at a favorite restaurant isn’t that great a deal if it means you spend money you don’t have to go there, but it’s awesome if you were planning to celebrate your first anniversary after that wedding you planned so well!

Best tip: Coupons, discounts and special offers are just like the rest of your money, so ask yourself how using them helps you to advance your savings goal. If they don’t, then you’re not “missing out” on anything that product marketer or venue manager wants you to have. If the answer is a sweet sale on something you use and need? Go for it, and save more!

 

Author profile: April Boey is an accountant at Reach technologies, a company that sells accounting software in Malaysia http://reachsoftware.com.my/ and Singapore http://www.reachtechasia.com/ . She has worked with countless business owners to help them to save more money and plan their finances better in order to build a successful business.

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