7 Money Mistakes You Made in Your Twenties (And How to Fix Them Now)
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If you’re like most of us, you probably wish you had been more financially savvy in your twenties. A little less partying, a little more planning for the future, right?
While we can’t provide you with a time machine so you can go back and make things right, we have collected a list of money missteps most twentysomethings make – and how to turn them around and get on the right track. Read on:
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Not Planning for Retirement
Common to most people in their twenties, especially in their early twenties, is a certain level of youthful short-sightedness, which is why it’s not surprising that most people don’t start saving for their retirement until they’ve left their twenties in the dust. When you’re twenty-one, or even twenty-six, retirement can seem such a distant prospect as to be nearly unimaginable. But failing to invest in a 401(K) means failing to earn money with your savings.
The fix? Start now! Don’t hesitate. Even small contributions to a 401(K) can improve the quality of your life come retirement age.
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Equating Youth with Invincibility
That youthful shortsightedness described above is also at fault for this common financial blunder. Many people in their twenties are not properly insured, which can be especially costly when it comes to health insurance. A serious illness or accident can easily plunge an uninsured twenty-year-old into deep debt.
The fix? Research health insurance providers and ensure that you’re adequately covered. And don’t forget about appropriate insurance for your home (and valuables) and car, too.
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Treating Credit Cards like Cash
When you’re living paycheck to paycheck or enjoying your newly acquired freedom in your twenties, it’s easy to forget that a credit card is not a plastic purveyor of cash. In fact, credit cards give you credit, which is not cash, but a loan. When you purchase with a credit card, you’re borrowing money. When we forget this and treat credit like cash, we can start racking up some serious debt.
The fix? If you’re saddled with credit-card debt from your twenties, pay it off as quickly as you can. This means forgoing the minimum monthly payment amount and opting to pay as much as you can afford each month. You’ll be saving a huge amount of cash in interest, and you’ll be debt-free that much sooner, so you can start saving or even investing the cash you were putting down on your debt.
And start using your credit card wisely: if you charge only what you can pay off each month comfortably, pay your bills on time, and maintain a borrowing limit appropriate to your income and needs, your credit rating will recover.