Financial Mistakes to Avoid When You're Twenty

For a stable financial future, don't make these financial mistakes in your twenties.

When you're in your twenties, making financial decisions that you regret may be the last thing on your mind, but the personal finance choices you make during this period, and before you reach the age of thirty, may affect your future life for decades.

To avoid this fate, it is advised to avoid 7 common mistakes, this stage of life, identified by an article published in the well-known American website "Invested Wallet" related to investment education.

1- Living on loans

It's easy to get as much loans as you can, but applying for more money than you need, so you can buy a car for example or live in a big house, is a bad idea in your 20s.

Depending on how much you borrow, you can spend up to 10 to 25 years repaying these loans.

So it is better for you at this age to completely stay away from spending loan money in order to have a better lifestyle, and instead deposit this money in your savings account.

2- Ignore your credit score

Delayed credit card payments, for more than 90 days, can bring down your credit score, which is the score that creditors review before extending credit.

3- Choosing bad friends

Your best friend might be a lot of fun for a day, but can he help you achieve your financial goals?

For example, if you pick a dodgy roommate, you'll pay the price later through your credit score.

4- Neglecting emergency savings

When you raise money, in an emergency savings account, you have money to cover auto repairs, medical bills, veterinary costs, home repairs, and other unexpected expenses you might have to charge on credit cards.

To avoid paying interest on accumulated debt in an emergency, save at least a thousand dollars, and preferably more, so that credit card debt does not extend into the next decade of your life.

5- Financing your life with credit cards

Sure, going out for a drink and dinner every night with friends, buying stylish furniture, taking frequent vacations, and getting the latest electronics can be fun, but if you put it all on credit cards, you'll pay for it later.

When you live beyond your means by financing everything you want with credit cards, you can end up falling into a debt trap and high interest rates that will follow you well beyond your twenties.

6- Ignoring the retirement fund opportunities

It's smart to start saving for retirement in your twenties, because you have decades to build your own retirement account.

For example, if you contribute $5,500 annually to a retirement account and earn 7% annually, you will have about $31,000 after 5 years, and if you save the same amount for 15 years, you will have $138,000. Keep working for 35 years and you'll get about $760K.

7- Laziness in achieving goals

Setting financial goals in your twenties motivates you to turn dreams into reality. Then it's time to start saving for a down payment on a home, contribute to a retirement account and build emergency savings, and build your professional skills to earn a higher income.