These are some of the biggest money mistakes to avoid when you’re in your 20s.
Your 20s seem like the perfect age between childhood and adulthood. You’re out of school, finally, so you’ll have more freedom than ever before, and you won’t be pinned down with responsibilities from late-career advancements, serious relationships, or children. On top of that, since the life expectancy in the United States is now nearly 80, it feels like you have plenty of time to make up for any mistakes you make now.
That may be true, to some extent, but you’re also vulnerable in your 20s. Some of the financial mistakes you make in your 20s could end up haunting you the rest of your life.
Why You Are Vulnerable in Your 20s.
Let’s start by looking at why the decisions you make in your 20s so vulnerable:
- Compounding. The power of compound interest is hard to fathom across periods of decades. If you leave your 20s with thousands of dollars of debt, that could quickly escalate into a life-consuming obstacle to overcome. If you leave your 20s with thousands of dollars of investments, you could set yourself up for early retirement.
- Habit formation. Breaking habits is incredibly difficult. If you spend the first decade of your early adulthood forming and solidifying bad habits, it could take a very long time to get rid of them.
- History. Credit and buying power accumulate over time. If you have a sketchy history, it will be much harder for you to do things like buy a house, or even rent an apartment.
- Inexperience. No matter how much you think you understand about the world, most 20-somethings are still woefully inexperienced. That makes them vulnerable to much bigger, more destructive financial mistakes than their elder counterparts.
With those principles in mind, these are some of the biggest money mistakes to avoid when you’re in your 20s.