5 money mistakes you should avoid making in your 20s - nobody will tell you these.

How was that moment when you received your first earnings in hand!!?? Be it a huge sum or a few pennies – earning money yourself is a huge success. But how have you viewed your earnings? Were they just expense satisfiers or wealth multipliers?

I’m here with one of the most underrated skills no one teaches either in school, college or workplace. Yes – that’s personal finance.

Managing one’s own finances has been a self-taught skill over years and to be frank students who belong to the science major have literally zero knowledge on finances, savings, investments and money management.

20s is the right time and the first step you should take to learn and manage your finances rightly. Needless to say, it’s indispensable to make very wise financial decisions and avoid grave mistakes that could jeopardize your fin-security.

Here are 5 money mistakes you should never commit in your 20s.

1. Postponing to make investments is the top-tier blunder people make in the initial years. Savings and investment are part of everyday finances. The later you invest, the lesser the returns. ‘21-23 is the age when most of us receive our first payment’. That’s exactly the right age to prepare a concrete saving plan.

Take a look at this example: Mr. A aged 22 and Mr.B aged 32 invest $100 a month at an interest of 8% per annum. Mr. A’s total savings at age 62 comes to $326,353 whereas the total savings of Mr.B’s savings comes to $142,768.

Did you note the difference – it’s a whopping $ 183,585 which in INR equals to 1.28 crores. You would end up being a crorepati. 

2.  Craving to purchase expensive gadgets is most prevalent amongst the younger generation. That’s when people fall into the EMI trap. Buying something on instalments may be appealing in the beginning, but paying off debts each month will ruin your finances in the long run.

Nowadays EMI schemes come with additional processing fees, hidden costs, and higher interest costs. For example: If you buy a laptop costing INR 40k on EMI – after the instalment period you end up paying more than 50k.

The longer the duration of the EMI, the larger is the interest cost you pay additionally. Think over this again. If you save INR 5k each month for 8months – at the end of the 8^th month you can purchase the latest model laptop than the one for which you craved 8 months back.  

3. An emergency fund is a must for everyone. Having a separate savings bank account and adding up little each month to that account every month is a great way to help you get prepared for emergencies and unexpected expenses.

A 10% of your monthly income can be added to this account. If you are earning INR 50k each month, 5k into the emergency fund would suffice.

You can even sign up for a separate RD account (Recurring Deposit) or invest in SIPs (Systematic Investment Plan) and withdraw them when needed. Make sure to not utilize money from this account for unwanted expenses. Touch it for emergency purposes only.

4. “Spending is not the only goal of earning money”. Of course there are expenses we need to meet every day, but that’s not the only door to it. Spending every penny and not setting a few aside is a serious mishap that could land you in huge debts.

‘To effectively manage money a concrete budget is a must’. You should follow the 50/30/20 rule. Check the below image.

Apps like Monefy & Money Manager help you track expenses you make on a regular basis and prepare reports and trackers with which you can have a check on your spending.

5.  A health insurance or a mediclaim policy is not something designed for people above the age of 40. Health issues and mental ailments are more frequent for the millennial generation itself.

Unhealthy food habits and too much restaurant foods are taking a toll on  health conditions. Health insurances come with accident cover, hospitalization cover and illness coverage.

Few companies offer health insurance coverage to their employees by default – covering you and your dependents (mom, dad, spouse, and children). So before you accept your appointment order check if it is included. If not there is no harm in getting one for you.

20s is not just about starting to earn. If you manage your finance well right from the beginning, your financial future is secure and in safe hands.

Warren Buffett the popular investor billionaire started investing at age 11. He is 90 years old now with a networth of over US$78.9 billion.

Nobody is too young or too old to start investing. This is the right time. START NOW. 

“Have financial goals, make budgets, track your expenses, invest long term and start early – now is the right time”

 

If you want to hear more from me on personal finance, savings, investments and money management – feel free to let me know on what specifically you wish to know. 

Send me them on Instagram or Facebook.