5 Financial Mistakes to Avoid in Your 20’s

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About the Author

Meet Brittan, a Personal Financial Advisor for her self-founded company, SavviHer, in Cleveland, Ohio. She is also a previous course creator for Rise. A graduate of the University of Notre Dame’s Mendoza College of Business, Brittan is passionate about helping young women break into the world of financial management and develop a network of financial advisors. Brittan advocates for changing the outdated way the financial industry approaches and works with women. Here, Brittan talks about how to navigate friends and financial responsibilities. Enjoy!

5 Financial Mistakes to Avoid in Your 20’s


Life in your 20’s can be tough. You’re just starting out in the real world, trying your hand at this whole “adulting” thing, and likely finding that your first few jobs look a whole lot different from what you expected. While the movies may make it seem like living and working in the big city is exceptionally glamorous (and, sure, at times there are some definite perks), by and large, this portrayal is far from reality. Between paying off the student loans, trying to eat well (enough), making time for a casual workout (because climbing the stairs of the Subway just isn’t cutting it), keeping your relationships afloat, and somehow still managing to make it look effortless on Instagram, most people in their 20’s are just trying to survive.

If you’re one of the many twenty-somethings trying to make sense of this life stage, take comfort in the fact that you’re not doing it alone. It can be a huge learning curve, but this decade does offer you the chance to lay an incredible foundation for yourself going forward. It may seem hard to believe, but financial decisions you make during this timeframe can have an amazing impact on your future. If you’re not quite sure where to begin but know that you don’t want to be looking at your bank account in ten years like you look at your insta-stories after a night out (…it happens to the best of us), then consider our suggestions below on the five mistakes NOT to make during this incredibly pivotal time in your life.

 

Mistake #1: Being way too lazy about Student Loans

Paying for things that don’t bring you joy would likely go against Marie Kondo’s advice, but trust us, incurring lots of unnecessary interest expenses is also no fun. If you’re one of the many, many young college graduates saddled with student loan debt, then it’s time to form a plan. Creating a budget and making your minimum payment each month is vital. If you’re concerned about being able to dig out of your debt, consider meeting with a financial professional who can help you implement some changes and form an achievable, strategic plan. Whatever you do – don’t ignore your debt. It won’t ignore you, and you’ll end up paying way more in interest than you need to.

 

Mistake #2: Living WAY beyond your means

It is awfully tempting to live in the gorgeous new apartment complex with the pool on the rooftop or to sign up for every fun social event your friend group decides to do, but keep in mind that these decisions can inhibit your ability to get ahead financially in your 20’s. So, you might be wondering, how can you save money but still be social? By budgeting and planning ahead, of course! If budgeting is new to you or seems like a lot of work, check out the many wonderful personal finance apps out there that will undoubtedly make tracking your expenses much easier (more on this here!). After a few weeks of tracking your expenses, you’ll likely have a few ‘a-ha’ moments and may find ways you can eliminate some expenses.

 

Mistake #3: Not taking advantage of your employer match

These days, most employers offer their employees a retirement plan that they can invest in. The majority of employers offer a 401(k), but those of you who work in the non-profit, education, or health sectors may find that you’re offered a 403(b). Others still may have a Simple IRA or other plan set up with their employers. Regardless of what plan you have available to you, it is critical that you take advantage of any employer match options. What does this mean? It literally means FREE MONEY is available for the taking. Many employers will match up to a certain percentage of what you contribute to the account.

For example, if you make $50,000 a year and have chosen to contribute 5% of your annual salary to your 401(k) plan, your company can also match that (depending on what their contribution limits are). In this example, if your employer were to offer up to a 6% match, that means they would be able to match your same contribution as long as it is 6% or less of your salary. Therefore, if you decide to contribute 5% of your salary each year ($2,500), your employer would also do the same thing. That’s another $2,500 you would not otherwise have invested. See…free money!

If you are not sure what plan is available to you, I encourage you to reach out to your employer to find out. Better yet, do some research and find out if they do match your contributions. Provided they do, it is incredibly smart to take advantage of this policy and earn as much free money as you can.

 

Mistake #4: Not saving enough money for an Emergency

If you’re thinking that saving money in case of an emergency seems really lame, it’s even worse to get into an accident and find yourself in a massive pile of unexpected debt. Accidents do happen. Employees do get laid off. Life can be messy …even though we wish that it wasn’t. Having at least 3-6 months of your income stashed away in an Emergency fund will be one of the smarter things you’ll ever do. Not only will you have some financial cushion should the worst happen, you’ll also sleep better in the meantime knowing you planned ahead. Note* if 3-6 months of your income seems like a big reach, try getting to $1,000. Once you hit that goal, try saving a bit more each month until eventually you have accumulated enough to leave you secured.

 

Mistake #5: Not opening a Roth IRA or other investment account

Compound interest is an incredible tool for building wealth. The important part to remember here about compound interest is that the longer your money is able to take advantage of the compounding effect, the better off you’ll be! If you have the ability to contribute to a Roth IRA or open an investment account in your 20’s (after prioritizing your student loan payments, retirement contributions, and Emergency fund, of course), your future self will thank you. It can literally pay to start investing young and thinking about the long-term.

 

“I hope my content serves as the catalyst women need to feel more confident in joining the conversation so that they, too, can take ownership of their own financial health.”

You can learn more about Brittan and checkout the great things she’s up to at her blog, https://financiallysavviher.com/

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