Life is exciting for men in their 20s. If this is your case, you may have just left college, or have started your first proper job. Consequently, you have moved out of your parents’ home or are thinking of buying your own house. If you are in a serious relationship, you may have moved in with your partner and the two of you are planning for marriage and children. Of course, you are also partying hard, and trying to fit into the middle class.
But, how much do you make in a month? The average 25-year-old male may be earning $39,300 every year, but he also has debts of $45,300 to deal with, from college, home and auto loans, and credit cards. Unfortunately, even with this striking financial imbalance, young men are notoriously bad at planning for a rainy day.
In your twenties, retirement can seem a long way off, and health insurance may seem like an unnecessary expense when you feel fit and healthy. It is no wonder that only 73% of 25-year-old men have health insurance, and only 67% have enough emergency savings to last them for three months, in the event they lose their job.
What most young men easily forget is that with age, comes more expensive and demanding responsibilities, such as parenting. As a result, financial mistakes made in their 20s negatively affect the rest of their lives, causing most of these men to survive on loans.
So, here are 15 financial mistakes you are probably making and need to avoid.
15. Moving Out Of Your Parents’ House Too Soon
Fewer young men are leaving their parents’ home in their twenties according to recent statistics. However appealing it might be to move out and get a bit of independence and freedom, many young people are now questioning whether their twenties is the right time to leave the financial security of living at home, for the responsibility of managing their own finances, and paying for everything out of their own pocket. Staying at home, where rent is cheap or often non-existent, can be a great way to build up savings for the future, meaning that you will be a bit more financially prepared when you eventually fly the nest.
14. Limited Understanding Of Bills
When young men do move out of home for the first time, it can be quite a wakeup call. Not only do they find themselves responsible for cooking their own meals and washing their own clothes, with mixed success, but they suddenly have to pay all these different household and personal bills that Mom and Dad previously took care of. The most important thing you can do when moving out is make sure you understand what bills you are going to be responsible for – whether that’s the gas and electric, or your own taxes, to make sure you aren’t hit by a nasty surprise a few months down the line.
13. Making Only Minimum Payments On Credit Card Bills
There are very few men in their 20s who don’t have at least one credit card. Well, credit cards are not bad, especially because there are a lot of circumstances in which they can help you manage your finances, such as in the case of one-off or unexpected expenses. The problem comes when you only make the minimum payment on your credit card every month, which means you are never actually paying off your debt, but simply paying the interest on that debt. As much as credit card companies love people who only make minimum payments, and it might be tempting to keep more money in your pocket for fun stuff, if you can afford it, you should always try and pay off credit card debt as soon as possible.
12. Spending On Wants Instead Of Needs
When you are still in your twenties, it can be difficult to resist the temptations to spend money, simply because it’s burning a hole in your pocket. Why not have nights out with your friends? Why not buy that new computer game you wanted? After all, these things are all enjoyable and make you feel good now. Investing and planning for the future, or paying off existing debt simply doesn’t have the same pay-off. In the long run, however, sensible spending will make you feel much better.
11. Not Saving For A Rainy Day
When you’re young, it’s all too easy to imagine that everything is going to continue running smoothly for a very long time. Hence, why do you need to worry about health insurance when you’re a young and fit twenty-something year old? Fact is, things can go wrong for all us – and in difficult economic times, people can end up losing their jobs. That’s why it’s important to have emergency savings in your bank account, in case of just such an eventuality. Understandably, it is difficult to force yourself to put aside some of your hard-earned cash every month when there are so more fun things to spend it on, but you’ll be glad you did if you ever need your rainy day fund.
10. You Despise Small Savings
The unfortunate fact is that many young men do find themselves getting into financial difficulties, either because of their spendthrift lifestyle or because they have too much debt from college and other loans. One of the worst mistakes you can make in such a situation is to think that because you are broke, there is no need to even try and save money, and that managing your finances isn’t important. Even if you only have $5 or $10 left at the end of the month, save it or put it towards your debts – don’t blow it. It may be a small step, but at least it’s a step in the right direction.
9. Living In Denial Of Your Financial Situation
Being resigned to ruin might be a dangerous side-effect of mismanaging your finances, but living in denial can be immensely devastating. When you first realize that your finances are slipping out of your control it can be too easy to pretend that everything is OK – to friends, family and even yourself. You may also find yourself papering over the cracks by taking out short-term loans or a new credit card. If things have gotten that bad, then it is time to ask for help. And if you really can’t bring yourself to ask for help from your parents, then there are official agencies who can help with debt management too.
8. Prioritizing Salary Instead Of Opportunities For Career Growth
In addition to moving out of home, men in their twenties begin their stint at the job market, and start a career. When considering job options, especially if you are lucky enough to have been given a few offers, you could be tempted to take the post which offers the most cash now. But rather than trying to make a quick buck, you should think about the opportunities that different jobs offer for advancement, and therefore, their future earning potential, or which position is going to give you the most job satisfaction. After all, there’s no point in taking a well-paying dead-end job if you end up hating going into work every day!
7. Not Sticking To Your Budget
Managing day-to-day finances can be the trickiest part of controlling your finances in your twenties. It can be particularly difficult to get into the mind-set that you now have to set – and stick to – your own budget, to make sure you have enough cash to last until the end of the month. Don’t be afraid to ask your parents for advice, and when you do set a budget make sure you write it down and add all your expenditures as you go along, so that you can see whether you are on target or not. It might take a few months to get your budget right, but your long-term finances will thank you in the end.
6. Lack Of Financial Goals
It is important to set yourself some financial goals, otherwise it can be difficult to stay motivated when it comes to sticking to your budget. Do you have something specific you want to save for? Your deposit for your first house? A wedding? Maybe you just want to buy a new car or go on a luxury holiday? Perhaps you’re one of the more sensible twenty-something men who is planning on saving some money for his future. Whatever your goal, make sure it is something you want, and you will find it much easier to resist the temptation to spend money you should be saving. To plan better, seek the services of a financial advisor who will help you make wise investment decisions.
5. Taking More Credit Cards
Short term debt, especially credit cards, can easily get out of hand if you don’t stick to your budget and pay them off as quickly as possible. Many young men think that the answer to credit card debt is to take out…. more credit cards. These companies often offer short term 0% deals to try and attract new customers, and it can be tempting to move your debt to one of these new cards to avoid accruing interest. Regrettably for you, all this means is that you have one more credit card to run up debts on. Try instead to develop a plan to pay off more of your balance every month, and once it is cleared, close the account and cut up your card.
4. Investing In Status Symbols
For a lot of young men, a car isn’t just a way to get from A to B, but also a status symbol. Consequently, several young men sadly find themselves tempted to splurge cash they don’t have on a stylish sports car, just to look good to their friends. The fact that car loans are reasonably easy to obtain only makes this kind of expenditure more tempting, but you should try and resist the allure of an SUV and go for something a little cheaper and more practical instead. Even better, assess whether you need to buy a car at all. If you live in a city with an excellent public transport network and few places to park, then a car could just end up being a hindrance.
3. Compromising Quality To Get Cheap Stuff
In a bid to save money, young men often end up buying cheaper goods that are of much poorer quality than their more expensive counterparts. In real sense, shopping for budget items can often prove to be a false economy, especially when your cheap washing machine or cooker breaks down after just a few weeks, resulting in an expensive repair bill. There is no need to buy top-of-the-line goods, but stick to reputable brand names and always buy from reputable stockists who will offer you a guarantee in the event of a fault. It really is true that you get what you pay for.
2. Failing To Plan For Retirement
Retirement can seem an awfully long way in your twenties. This is a fallacy, especially because each day takes you a step closer to retirement, and you can rest assured that one day you will have to support yourself through old age, of course being unemployed. This means that it is never too early to start planning for retirement, through savings, investments or pension plans. Gladly, a lot of people find that their workplace will allow them to make contributions every month directly from their pay check, something you should take advantage of. This is by the far easiest and most effective way of saving, and the money is never in your bank account.
1. Buying A House Too Soon
It can be tempting to try and get on the housing ladder as soon as possible, mostly as a result of bowing down to pressure from older relatives who will constantly ask you when you’re going to buy your first home. What they don’t know is that times have changed from when they got on the housing ladder, though, with first-time buyers now needing a bigger deposit just to be considered for a mortgage and houses in the best areas being prohibitively expensive. To be safe, don’t buy a house just because you think you should. Wait and do it when you have the finances to do it properly, and when the market is beneficial to your circumstances.
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