Financial Mistakes You’ll Make in Your Twenties

Being in your twenties can be tough. One second you are in college, partying, enjoying life, and the next you’re juggling a job, new responsibilities, and figuring out what you want to do for the rest of your life. Because of all this juggling it can be very easy to neglect your finances and make mistakes because your mind is on other things. We have compiled a list of financial mistakes adults in their twenties often make so you can be ahead of the curve.

Not Making a Budget or Sticking to it

A major pitfall that many face in their twenties is not having a budget. A budget is crucial because it helps you check in with yourself everyday to make sure you’re meeting your financial goals. Without a budget you are basically a ship without a steer, going wherever your emotions blow you. On the other hand, even when some make a budget, they find it very hard to stick to that budget. It is understandable that it can be hard to stick to a budget sometimes but it is crucial that you make the effort to do so because it is the difference between wealth and being perpetual broke. To learn some tricks to staying on budget, check out our post on 3 Easy Budgeting Tips.

Failure to Negotiate Their Salary

Another mistake that people in there twenties make is not negotiating their salary with employers. Out of the many ways to make money this is one of the quickest and simplest ways to increase your income. Many often overlook this strategy for various reasons for example they are scared that they may get their offered rescinded, or they just don’t know how to ask. Consider this, if your potential employer valued your talent wouldn’t they want to try and keep you, and second, the worst they could say to you is no. The bottom line is negotiating your salary is the very definition of nothing to lose and everything to gain. Do some quick Google searches or use sites like Glassdoor to learn the average salaries for your field and level of position.

Relying on Credit Cards

Irresponsible use of a credit card can be a fatal move. Using them can be very seductive because it often feels like you’re not spending your own money. On top of that, you don’t have to pay off your credit card immediately. This gets many into the habit of deferring payments. Before you know it, you’ve dug yourself into a deep hole of debt, and you have no idea how to get out. To avoid this, it is always wise to do your research on the credit cards you use, and to pay on time and in full. If you happen to already be in the hole check out our post on 5 Ways to Eliminate Your Debt.

Neglecting Your Credit Score

Your credit score shows you and others how responsible you’ve been with the money you’ve borrowed over time, this includes not only loans but credit card history as well. A credit score ranges between 301 and 850. The higher the score the better your credit is considered. Your credit score is important because this score is taken into account when you want to make big purchases later on in life such as taking out a loan, buying a car, applying for a mortgage etc. It would be a huge mistake in your twenties to not know how credit scores work and not to build yours up, because it could restrict you from financial moves in the future.

Not Having an Emergency Savings Fund

As we all know life is very unpredictable, however it is safe to say that during your life there will be random unfortunate events that you can’t control. An emergency savings fund is protection between you and the random things in life. However, not many people in their twenties have this emergency buffer. Saving as little as $1,000 could save your finances on a rainy day. Check out our earlier blog on The Importance of Savings, and How to Start to learn more about getting started.

Neglecting to Invest Early

The idea of investing can seem complicated, which is why it’s understandable as to why a lot of people in their twenties don’t choose to invest. Not to mention that we have seen and heard about all sorts of things happening to the stock market. However, investing your money is one of the best ways to make your money work for you. Not to mention if you do your research and invest wisely you could find yourself not having to worry too much about your financial future regardless of what happens to you.

Waiting too Long to Save for Retirement

The biggest mistakes that people in their twenties make is not having a retirement strategy. This is an extremely easy thing to do because the idea of retirement seems to be light years away.  Another easy trap to fall into is the notion that you can easily make up for lost time not spent saving for retirement. In reality it is actually the opposite, check out our post on How Much Money Do You Really Need for Retirement? to put things into perspective. The earlier you start saving the sooner you can put compound interest into play making it easier and easier to prepare for retirement as you get older.

In your twenties there are many different things that are calling for your attention. This makes it very easy to neglect things that are not very present in your life. This can result in making a few mistakes that can haunt you for years to come. Hopefully by reading this list you can catch yourself or avoid making the above mistakes all together.

Got a great idea or suggestion of what you would like us to blog about? Please send your inquiries to stashadvisor@gmail.com. We are all about bringing you the most value!

This blog post is provided for discussion purposes, and is not intended as professional financial advice. It’s intent is not to be used as the sole basis for your investment or tax planning decisions. To get more information please speak with a financial planner. Under no circumstances does this information represent a recommendation to buy or sell securities.

3 Easy Budgeting Tips

It’s always hard around holiday season to stay on budget. You’re balancing your normal expenses along with added expenses of gifts, dinners or drinks with friends, and travel. Many times it comes to the end of the month and you realize you have spent  more than you intended to. So here are three tips to stay on budget.

Have Small & Large Financial Goals

We all have big financial goals, whether it be buying a car or having a worry free retirement, however many people do not focus on the small goals. Setting smaller financial goals makes larger financial goals more achievable along with helping you stay on budget. After studying my budget I discovered I was spending way more than necessary on coffee. So, I set a small financial goal of only allowing myself to purchase two coffees a week. Setting a small goal of only purchasing two coffees a week when I was normally purchase four, saved me $10 per week, that is $40 per month, and $480 per year. Take a look at your spend habits especially around the holidays can help you figure out where you can compromise, whether it be eating out, entertainment, drinks, or cab rides, you will be surprise when you break things down by category and learn how much you are spending. To learn more about setting financial goals check out our post on Accomplishing Your Financial Goals.

Check Yourself

Set aside 30 minutes each week to check your spending and budget. Doing this allows you to see if you are meeting both your financial goals as well as letting you know where you are at financially.This also creates a much easier end of month calculation of expenses and no surprises when you get your bank statement.

Keep it 100

It is important to have a budget that is not only realistic to your income but also one that best suits you. The main goal of budgeting is to allow for you to pay all you need to monthly and to also save money for your future (either short or long term goals). So, when you are creating your budget take an honest look on where you spend your money. There may be areas where you do need to cut your spending but that does not mean you need to get eliminate a category completely. For example, I love to eat out so my eating out budget is larger than the average person. I also do not have a car so all associated costs with a car I do not have, however I do need to budget money for the metro, buses, and cabs. So keep it 100 with yourself and your budget to make sure you never end up in the red.

Staying on budget can be hard but if you have developed a good budget to begin with and then identify steps to take to stay on budget it becomes a lot easier.

 

Got a great idea or suggestion of what you would like us to blog about? Please send your inquiries to stashadvisor@gmail.com. We are all about bringing you the most value!

This blog post is provided for discussion purposes, and is not intended as professional financial advice. It’s intent is not to be used as the sole basis for your investment or tax planning decisions. To get more information please speak with a financial planner. Under no circumstances does this information represent a recommendation to buy or sell securities.

The Importance of Savings, and How to Start

Do you have a savings account? I ask because doing this small thing can make a big difference in your financial situation. When I first started making money, I would put all my earnings into my checking account. I thought it wouldn’t make a difference if I kept all my money there, or in a savings account. However, this made me disorganized. There was nothing stopping me from spending everything in my checking account. It got to the point where I wouldn’t look at my account because I was scared to find out how much money I had spent. Whenever things such as holidays, vacations, concerts, or birthdays popped up I would just spend what was in my account, which didn’t help my account grow. After having enough, I made a decision to change the way I handled my money, and started reading books on personal finance. I stumbled upon a book called “The Total Money Makeover” by Dave Ramsey that completely changed my perspective, and taught me the importance of saving. Now I have structure in my finances, and can withdraw from my bank account without worry.  All it took was for me to separate my money into different accounts.

Why You Should Get a Savings Account

There are two reasons why you should have a savings account, if you don’t already have one. First you’ll have money in the future when you need it and second, you will have money when you unexpectedly need it.

Have Money When You Need It

The future isn’t certain, but you do know for certain that some events will inevitably happen. We all know Christmas comes around every year on December 25th, so why not plan for it? Would you take a trip to Africa without packing light clothes? Would you go to the beach without packing a bathing suit? No. So, plan for your financial future by stashing away a certain amount of money each month or pay period so that when expected events comes around, you can spend the money you saved instead of the money you need.

Expected Savings Examples

One example of a savings account you can open is for presents. Let’s say you know you are going to spend $200 on presents for Christmas. Starting in January, you could put $17 into your account every month and by December, you will have $204. Another example of a savings account you can open could be for festival tickets. Tickets cost $240 and the concert is in September so in January, you start saving $40 each month. By June, you already have enough for your ticket. With such simple installments made to your savings accounts you’ll have enough money to enjoy the things you like well before you have to pay for them.

Emergency Savings

Life can get hard unexpectedly. That’s why you need a safety net. I remember shaking my head while reading “The Total Money Makeover” and Dave said “It is going to rain. You need a rainy-day fund”. I thought to myself that’s nice but that could never happen to me, I’m careful. I’ll follow his advice because I want to be rich, but I’m positive that I will never have an emergency. Well let’s just say that  thanks to Dave’s advice I didn’t get wet, when it did eventually rain. My emergency savings fund has been  there to protect me from a few unforeseeable events.

Set up Your Emergency Savings Fund

Things can happen to you such as your laptops breaking, all the way up to you losing your job. With life you never know, that’s why it’s important to have a little insurance. Above all other savings, an emergency savings fund should be your top priority. For an emergency savings fund it would be wise to save for the worst case scenario. But this amount can sometimes be a bit overwhelming to consider. So first Dave says to start off with building an emergency savings fund of $500 if your income is equal to or under $20,000 per year, and $1,000 if it is over $20,000 per year. A few  examples of what you can do to establish your initial fund are, putting as much money as you possibly can from your budget into your emergency fund, working extra hours, selling something, or having a garage sale. Use your imagination to come up with  ways to build your initial emergency fund. The point is to establish your initial fund as quickly as possible. After doing so you will have the comfort of knowing that if something were to happen to you, you at least have $1,000 to cover the damages.                       

After building your initial emergency savings, build your account so that you can cover all your expenses for 3-6 months. To accomplish this, you should use all the available cash you have and put it into your emergency savings account. By doing so you will be prepared for just about any inconvenience that may come your way. Once you accomplish your savings goal, your emergency savings fund should ONLY be used for emergencies and nothing else.

Creating savings accounts is a simple thing that can make a big impact on your financial life. The bottom line is that planning your future, by saving, will keep you from spending money that you need, and help you grow your wealth properly. By saving for events you know will happen and emergencies, you will have a greater amount of control over your finances. On top of this you will protect yourself from the uncertainty of the future.

Got a great idea or suggestion of what you would like us to blog about? Please send your inquiries to stashadvisor@gmail.com. We are all about bringing you the most value!

 

Sources:

Ramsey, D. (2003). The total money makeover: A proven plan for financial fitness. Nashville: Thomas Nelson Pub.