This video is about 5 mistakes that people in their 20's should make sure not to do. It is very important to our financial futures that we take the years in our 20's to start realizing the importance of starting early. There are so many benefits to saving as much money up as possible while you are young so you can invest and receive years of compound interest.
The first mistake that people tend to make is not contributing to their 401k and receiving their employers 401k match option. This option allows you to invest a certain percentage of your salary into your 401k and when you do that your company will also contribute to your 401k as well. Companies will normally offer either a $.50 contribution per dollar or a dollar for dollar match up to a certain percentage of your salary. This is very important to take advantage of now because we need to focus on our retirements earlier rather than later. Especially with most private companies getting rid of their pensions. Plus like I said before and will say many times after this, is to take advantage of those extra years of compound interest too!
The second mistake I notice people are making is not focusing on saving as much money as they possibly can while they are young. I see people get their first real jobs with real salaries and they waste their money on things just to impress others. In a few years nobody is going to remember what clothes you wore or what shoes you had, but if you saved that money instead and invested it, you could be far ahead financially than people who wasted money just to impress others. Would you rather nice shoes and clothes now or a luxurious house and car later in life? That is what I always ask myself when I am about to make impulse purchases. Is it worth it? How much would this money turn into if I got this average return? I've heard countless people say to start saving young and when I was younger and didn't know much about finance I was like "yeah, okay I'll worry about that when I'm older" but now that I understand how valuable it is to save young I can understand why they were telling me that.
The third mistake is to not start building your credit score. By improving your credit score you will be able to qualify for better interest rates and you will be paying lower finance charges on credit cards. The best thing to do is go out and get a great beginner credit card and only buy things that you would normally buy like groceries, movies, etc. This way you will be building up your Payment History which is 35% of your credit score and your Credit History which is 15% of your credit score. BUT BE CAREFUL and make sure to use the credit card correctly. Pay off the card in FULL ON TIME EVERY SINGLE PAYMENT.
The fourth mistake is not keeping a budget. By keeping a budget you will be able to see areas of your expenses that you can cut out and start saving you money. Having a budget helps keep you organized and on top of where your money is going. Budgeting allows you to be able to see realistically if you can buy something or be able to save up enough to eventually buy it. One great model to follow is something called the 50-30-20 rule. This will give you the basics to get you started off strong with starting your own budget.
The last mistake to avoid is not setting goals. Setting goals will help motivate you in so many ways. One type of goal you need to focus on is short term goals like saving up for a vacation. By doing this over and over you can move up into the next type of goals which are medium goals. These goals are like buying a car or paying off student loan debt. However, since you have practice from the short term goals you should be experienced. And the last type of goal is long term goals like saving for retirement and other investments.
All of these are some mistakes that you should try to avoid in your 20s that will help set you up for the financial future.
DISCLAIMER: I am not a certified adviser and just make videos expressing my opinions based off of research.
Catch you later,
Dolla Dill
5 Financial Mistakes to Avoid in Your 20s
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