Personal finance is a tricky thing to manage, especially when one is young. While people can end up making mistakes with their money, it’s important to avoid certain mistakes that can have far reaching financial consequences in the future. Here is a list of financial mistakes that young people, in particular, must avoid:
Spending before Saving
When you are in your twenties, it’s easy to spend freely when some money comes your way. After all, you have your thirties and forties to save, right? Actually, no. Certain expenses you make in your twenties can get carried on to later in life. For example, taking out loans to buy a vehicle or even a house have consequences for years to come. Therefore, it’s smart to save in your twenties and control spending. Those who want to take out loans for essentials like a vehicle and a house must make careful calculations to make sure the due amount can be handled with future income.
Not Planning for Retirement Early
Young people don’t think about retirement, period. And that can be a major mistake. Savings for retirement must start as young as possible, especially in your twenties. The longer your retirement fund has to mature, the more money you will make in interest. Also, when you are in your forties or so, it will be more difficult to start saving for retirement due to other commitments.
Owning Too Many Credit Cards
If you must own a credit card, have only one, or in the maximum two. Do not fall for marketing tactics and end up with more than two credit cards. Credit card debt is a very serious issue facing us right now. The credit card debt you incur when young could cripple your finances for decades to come. Also, you could find yourself in the bankruptcy court on your thirtieth birthday. So, avoid freewheeling spending with credit cards. Use debit cards and learn to control compulsive spending.
Buying too Many Vehicles
Unless you absolutely need to, avoid buying more than one vehicle when you are young. Vehicles, unlike property, lose value with age. So you should not spend your valuable cash assets buying a new car or a boat. Save money to own an extra car in the future, but don’t go into debt for it now.
Not Diversifying Investment Portfolio
When you start investing young, do not limit yourself to tech stock or even real estate. Don’t put all your eggs in one basket, so to speak. Protect your assets by diversifying your investment portfolio. Better yet, you should hedge your cash assets against economic volatility by including gold in your portfolio. You can buy physical gold at good rates from reputable dealers like Lear Capital.
One final word, do not hire a financial advisor to manage your money. The industry has been stricken with controversy, mostly because financial advisors more often than not don’t have a client’s best interest in mind. You could lose a lot of money in various fees these so-called professionals charge. Therefore, either get an advisor that sticks to the fiduciary standard, or manage your money on your own.