A lot goes on in one’s 20s. It is the time where most people finish their studies, look and find love, start to be independent, start working and even become parents. Worse off, this is the period where most people make regrettable money mistakes. I must say though that we all make money mistakes throughout our lives. However, the ones we make in our 20s play a huge role in either making or breaking our financial and investment paths. Below are 10 of the biggest money mistakes to avoid in your 20s:
1. Unnecessary Student Loans
The Higher Education Loans Board (HELB) of Kenya offers student loans to qualified students after form 4. However, I would advise most millenials against rushing blindly for this ‘free money’. The truth of the matter is that most students end up wasting this money and end up paying exorbitant amounts of the same in form of loans and interest. If calculated, this ends up being very costly to the student in the longrun.
2. Spending more than you earn
There is no good thing that comes out of living a lifestyle that you cannot afford. It is true that most people earn a fraction of what others get when they are newbies in the job market. However, this should not be an excuse for living a fake life since this will only bring more bills on your plate. Live within your means as you look for better opportunities.
3. Living in an Expensive Rented Apartment
Honestly, this is one of the biggest money mistakes that people make in their 20s. They end up spending their hard-earned money to impress people who really don’t care about the same. Set a budget for a rented house and save the rest. Sooner or later, you will realize why it was so important for you to do so.
4. Failing to have side hustles
Having your fulltime 9-5 may give you some sort of financial security. However, with the way the world is set up, having one source of income is not enough. Use your free time to do side gigs such as a business or even online writing. It could be anything. The good thing about this era is that you can have your business seamlessly run online.
5. Failing to Budget
It is so easy for one to be a spendthrift when they have not set a budget for their finances. Having a budget helps you direct you where you want your money to go. This will also help you live within your means and avoid impulse buying.
6. Failing to Save and Invest
To most 20-year olds, making money is not the problem. The problem is directing the earned money to a profitable and good course. It is very important to ensure that every month, you save some money in a savings account. You also need to look around for investment plans then find the one that works best for you. This will ensure that as time goes by, you have more money to your name, hence having no need to worry about retirement. Actually, the sooner one starts saving for investment, the better.
7. Unnecessary Extravagant Debt
Taking a loan of ksh.400, 000 to take your crush for a vacation in Zanzibar island is totally uncalled for. Reason being? Your so called crush may not even be interested in you. Plus who makes such expensive decisions to please someone? Wait, people do, but the question remains; how are you going to keep up with the façade?
8. Not having Health insurance
Towards the end of last year, I came to realize how important health insurance is. This was after a friend suddenly fell in and we had to spend huge amounts of money trying to find what the issue was, leave alone the medication cost. You may sit back and say that you hardly ever fall sick, hence you see no need of having a health insurance. However, you just never know when you may need millions for a medical emergency.
9. Failing to have a Money Talk with your Partner
It can be quite uncomfortable to sit down with your partner and talk about money. This is mostly needed especially if the two of you live together. This will help you know the purchases you need to make, what is more important and where to allocate your money in terms of investment. In addition, make sure that both of you are on the same wavelengths on all things money.
10. Failing to Have a Financial Plan and Goal
It really does take time and effort for one to achieve a desired financial goal. It is mostly important for one to sit down and have a realistic approach on how they are going to achieve it. Setting time frames is also important since it will keep you on your toes, preventing you from going off-track. The same applies to parents who decide to have babies without having a financial plan for the same. Babies are expensive. It is important to plan ahead of a baby by noting things such as maternity leaves, post-partum needs, diapers, baby food, hospital visits and school fees. Planning in every aspect is key.