6 Financial Mistakes People Make in their 20's and How to Fix Them
But now, the party’s over. You’ve woken up into adulthood and realized that all that overspending is going to cost you big—and it’s going to cost for years to come. Luckily, there’s hope. It’s not too late to fix the financial mistakes we all make when we’re young and blissfully ignorant. Here are six of the most common mistakes people make while in their 20's and how to fix them:
1.) The mistake: Racking up credit card debt
When all of life’s pleasures are just a swipe away, it’s easy to rack up huge credit card bills.
The fix: Use cash or consolidate your debt. Create a budget to monitor your discretionary spending. Stop swiping credit cards until you get your spending in check, and stick to debit or cash only. If you have a lot of credit card debt, you could consider transferring your balance to a Community Financial Mastercard. Transfer balances to your Community Financial Mastercard between January 2, 2019 and February 28, 2019 and you’ll pay only 2.9% APR* on the transferred amount until August 31, 2019. There are no balance transfer fees. Learn more at cfcu.org/cardpromo.
2.) The mistake: Ignoring your credit score
Aggressive credit card usage may have handicapped your credit score, making getting a large loan difficult. A poor score will also burden you with an unfavorable interest rate for these loans.
The fix: Know your score and pay down your credit card debt. Begin by monitoring your score through annualcreditreport.com or sites like CreditKarma.com. Next, work on paying off credit card debt instead of only making the minimum payments. Choose one bill to pay down first and make the largest payment your budget allows. Once you’ve paid it off, work on the next bill until you’ve paid it off and repeat until there’s no more debt.
3.) The mistake: Skipping student loan bills
When you’re facing a huge debt and have an entry-level salary, it’s tempting to just pretend the debt doesn’t exist.
The fix: Work it into your budget. Call your lender to work out a more feasible payment plan and check if you qualify for a student loan forgiveness program. Most importantly, make payments a part of your debt payment plan so you never miss a payment again.
4.) The mistake: Neglecting your retirement
Neglecting your retirement means missing out on years of compound interest gains.
The fix: Think of it as a fixed expense. Think of retirement savings as a necessary, fixed expense that must be worked into your budget like rent. Work with the most you can afford and max out your IRA or contributions to your company’s 401(k) plan.
5.) The mistake: Not having an emergency fund
Scrambling for funds to pay for a large medical expense or to live off of during an unexpected layoff can be a nightmare.
The fix: Start small. Work with whatever you can to make monthly contributions to an emergency fund. Keep your emergency money in an account that offers an attractive earnings rate, but allows you to withdraw funds without penalty.
6.) The mistake: Not creating financial goals
It’s understandable not to have your entire life planned out yet, but it’s important to set some financial goals.
The fix: Create goals now. Do you want to buy a house within the next decade? Are you hoping to retire by 55? Having a concrete goal in mind will help you manage your money more responsibly.
Your Turn: What were some of the financial mistakes of your 20's, and how did you fix them?
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