The Biggest Financial Mistakes Young Adults Make
If you’re a young adult new to the workforce and investing, then you’re not expected to be a financial expert. You may be on your own for the first time and managing your own wealth is new to you. As such, it’s natural and human to make some mistakes along the way. You may have already made some.
Even though it’s common for young adults to make some financial mistakes when they’re just learning how to manage their finances, it can be costly. You most likely do not have a lot of money saved up yet when you’ve only been employed for a short amount of time, and you have your whole future ahead of you. Therefore, you should know how to avoid the biggest financial mistakes. Here are some of the most common financial mistakes young adults make and how to avoid them.
- Waiting to invest- One of the biggest mistakes young people can make is having the idea that they’re too young to start investing their money. The earlier you start investing in the stock market, the more time your earnings will have to grow. Don’t be afraid to take risks; the market may take some dips, but it follows a general upward trend, so your investment will pay off over time.
- Misusing credit cards- Millennials are notorious for having bad credit scores. The image of an irresponsible twenty-something shopaholic may be more of a stereotype than reality, but you definitely should make sure you’re practicing responsible credit card use to avoid running into problems later on such as cash advances, large balances, late fees, and only making minimum payments. Also, be careful how many store credit cards you sign up for- don’t take on more than you can manage!
- Not creating an emergency fund- Everyone with an income should have an emergency savings fund to dig into when needed for unexpected emergencies such as car repairs, injuries, or theft. Figure out how much you can afford to set aside from your paycheck each month, and you will be grateful later on that you did this.
- Not taking advantage of discounts- There are a lot of discounts available to young adults if you know what to look for! If you’re still a student, take advantage of student discounts wherever they are offered by having your student ID on you wherever you go. If you’re planning something with friends, look into group deals through sites like Groupon. Also, not saying you need to be an extreme couponer, but coupons can definitely be your friend and save you a lot of money over time.
- Not setting a budget- It can be easy to overspend when you’re out with friends and apps like Venmo exist that allow you to pay your friends back later, not thinking about the consequences at the time. Little things like coffee and lunches out can really add up and take a toll on your finances, so make yourself a budget of how much you can feasibly spend each month after all your fixed expenses with enough left over for some wiggle room, and stick to it!
- ATM fees- It may be convenient to use whatever ATM is nearby when you’re taking out cash, but those $2-$3 ATM fees can really add up. Stick to using free ATMs or the one at your bank whenever possible to avoid these fees.
- Creating a joint account- If you’re young and in love, you may think it’s a good idea to create a joint bank account with your significant other. However, unless you’re actually married, you never know what could happen later on to change your relationship or financial situation.
- Not planning for the future- You need to actively think about your future whenever you’re managing your money, not just when you’re approaching retirement. If you have plans to travel the world, attend graduate school, and retire comfortably, then you need to factor those financial milestones into your expenses.You should look for an employer that will match your retirement contributions. Meeting with a financial advisor can be an excellent way to help you plan for your future.