Learning how to save money in your 20s is probably one of the most smartest things you can do for your financial future. For most young people, their 20s are a time of self-realization, experimentation and spending! It is a time period when you are graduating from college, starting your first professional job, and figuring out what you want to do with your future. Millennials, in particular, want to have fun and experience as much as they can. While your 20s could certainly be the right time to do this, it is also an instrumental period when it comes to financially securing your future. If your start making wise money choices in your 20s, it can set you up for success in your 30s, 40s, 50s and so on. Let’s put it like this…you’ll be ahead of the game if you start early.
When you don’t have a lot of money, making big expenditures can seem foolish, but it is possible to spend foolishly even on wise things. Here are 5 financial mistakes you’ll want to avoid while you’re in your 20s in order to save money:
- Failing to Maintain Health Insurance
The young often feel as though they’re invincible, but one accident is all that is required to jumpstart the downward spiral of medical expenses and bills. For example, an emergency appendectomy will, on average, cost $43,000.00. If you do not have health insurance, you will be on the hook for paying the balance in its entirety. That is a lot of debt to work your way out from under. If you have health insurance, the cost (minus your deductible) will be covered for you.
- Going Into Debt For a Wedding
According to Fortune.com, the average cost of a wedding in the United States in 2016 was $35,329.00. While marrying the love of your life is certainly a milestone occasion, you’ll need to manage your expenses carefully. You don’t have to elope to cut expenses, but you don’t need to spend an arm and a leg to have an unforgettable day.
- Not Starting an Emergency Fund
The ideal emergency fund should contain enough money to cover 3 to 6 months worth of your living expenses (including rent, utilities, car payments, etc.). When a big expense comes up, it always easy to tell yourself, “Oh, I’ll start next month.” However, this is a dangerous game to play. If you do not have an emergency fund to rely on, you’ll have to resort to other means (like credit cards!) to pay for your expenses in the event that you lose your job or are unable to work. Credit cards will quickly teach you how to live paycheck to paycheck while you attempt to pay them off.
- Buying More Car Than You Can Afford
Many people opt to buy cars brand new because they do not want to risk being stuck with a lemon. While this is understandable, buying a new car will ultimately cost you more than the price tag. When you factor in insurance for a new vehicle and the interest rate of your auto loan, a new car with a $25,000.00 price can cost you upwards of $36,000.00 or more.
- Not Contributing to a Retirement Fund
Financially, this is often one of the most damaging mistakes a person in their 20s can make. Even if you are working a minimum wage job while in graduate school, you can still put away savings in a Roth IRA. Retirement is often viewed as an abstract notion that is far off in the future, and immediate needs often seem more pressing, but this should be a priority in your life.
When you reach your thirties, you don’t want to look back and say, “I wish I had done this…”If you’re financially savvy now, you won’t regret it, but you m