Everyone makes mistakes – it’s just human. I personally made twenty money-making mistakes during my 20s. But I learned from them and since then I have made different decisions in my thirties. Here are four money mistakes I made in my twenties that cost me thousands of dollars and what you can do to avoid them.
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1. Do not start an emergency fund earlier
An emergency fund is a powerful financial tool that can help you get out of stressful situations more easily. I didn’t have an emergency fund until my late 20s. From car problems to unexpected vet bills, I caused myself extra stress because I had no savings in emergencies.
With no extra money set aside, I had to use my credit card for a few significant expenses. Luckily, I knew how important it was to repay as much as possible on the card balance. But I still inflicted some credit card debt of interest.
If you do not have an emergency fund, I urge you to start it immediately. Even a small fund can be helpful when you unexpectedly need money. Here’s how to get started:
- Open a savings account it is separate from your regular bank account.
- Automate your savings with weekly or monthly transfers.
Even if you can only afford to save $ 25 a week, it will add up. After a year, you’ll save $ 1,300. Take advantage of ours emergency funds calculator to find out how much you should save.
2. Staying on jobs with low wages and small benefits (which I hated!)
I guess most people have doing jobs they hate. I had more such jobs in my twenties. They all had the same problems in common: low salaries and little or no benefits – and for me they were of no personal interest.
If I had changed jobs earlier, I could have made more money and improved my quality of life. I’ve been freelancing for over five years and it’s one of the best decisions I’ve made. While freelancers may not be for everyone, for me they are.
Now I’m looking forward to the job I’m doing. And I control my income potential – I can take on more or less work as needed. I also control my schedule and in doing so choose the priority of travel and time with family.
Once you have payment bills, you may have to stay in a job you don’t like. But don’t stay forever if you can help. There may be a class or certificate you can research that can motivate you to a job for which you are better suited. Don’t be afraid to do things differently than the norm. Finding a better job can improve your happiness, mental health and financial situation.
3. Don’t use credit card rewards before
I love credit card rewards. I now use multiple rewards cards for my regular spending. But there were times when I didn’t use this type of card at all.
I got my first credit card before going to college to learn how to build your credit. After a couple of years, my hard work paid off and my loan was in excellent condition. At that point, I could definitely be approved for the prize card. Instead, I missed the opportunity to earn a reward for consuming groceries, buying food for lunch and meals, and other living expenses. It’s hard to say how much I lost, but I estimate I could have earned at least $ 5,000 in rewards if I had started using credit cards with rewards earlier.
4. I do not increase my contributions to Roth IRAs
This one hurts the most. I opened a Roth IRA account in my early 20s, after graduating from college. It was then that I realized the importance to some extent retirement savings. I also had a certain understanding for that compound interest. By starting early, I could allow my money to grow faster over a longer period of time. But I didn’t make much money in my early 20s.
For the first few years, I could not afford the maximum contribution. But in my mid or late 20s, I had to adjust my spending habits to make it work. I missed the big money growth because I didn’t contribute as much as possible. If I could go back and do things again, I would maximize my contribution to get there annual contribution limits every year, even if it meant fewer fun nights spent with friends.
Now I am increasing my contribution to mine Roth IRA and I did that during my 30s. But I estimate that my mistake cost me at least $ 25,000. And that’s just the value of the contributions I didn’t make. It does not include potential interest rate increases. (Knowing that number would upset me more!)
Mistakes happen, especially with money. But we can learn from them and make smarter choices as our situations change. I regularly write and read about personal finance topics, but I always learn. I adjust my financial habits to the knowledge I have acquired, and so can you.
No matter where you are on your financial path, I hope you will learn from my financial mistakes – and set yourself up for better financial success.
