On Personal Finance Mistakes to Avoid
As a slightly “older millennial,” there are certain things I wish I had done differently in my twenties.
While you can technically afford to make some mistakes in your early adult years, it’s always wiser to learn from others’ mistakes!
It’s unlikely that anyone has made absolutely zero mistakes when it comes to their personal finances. If you’re able to learn from your experiences and commit yourself to clearly defined goals, you’ll be able to improve your finances and get a headstart the earlier you dedicate yourself to it.
If you happen to be below the age of 25, listen up because — even though it may not feel like it just yet — the big 3-0 is right around the corner. You don’t want to spend your thirties regretting what you could have done better years before.
Here are five personal finance mistakes to avoid.
1. Thinking that “Following Your Passion” is Sage Advice
Depending on who you ask, “doing what you love” is often well-intentioned advice that’s doled out when someone is struggling to find their career path.
In reality, both passion and purpose are crucial when it comes to personal finances.
Having a passion project alongside a full-time job doesn’t sound as exciting as throwing your full focus onto trying to make a living from your passion. But it can give you stability and a sense of emotional security from being able to afford the basic necessities in life.
Don’t let a burning desire to commit to your passion overtake your responsibility with finances. If things like saving up for a downpayment or building an emergency fund and nest egg are important to you, keep a practical eye on what you’ll have to focus on for long-term success.
2. Settling with a Financially Irresponsible Partner
The romantic notion is that true love conquers all.
However, real life is a little different and requires you to take off those rose-tinted glasses if you have them on.
You MAY be able to work things out with someone who doesn’t have the same views about money as you.
But arguments about money are one of the top predictors of divorce. You’ll probably save yourself a lot of stress and heartache if you choose to be with someone who respects you…and who shares a similar view when it comes to handling finances.
Behavior and actions will let you know if you should be building a future with said partner.
* Check out our guest post on Money Mini Blog where we go more in-depth on this top relationship money mistake to avoid.
3. Believing that Debt is Normal
Debt is common. When I was 25, I remember that someone told me that “it was okay” to get into $40,000 of debt from student loans because “that was the average number.”
I wanted to retort that just because it was common didn’t mean it was right, but decided to conserve my energy for another day.
Believing that debt is normal is insidious as it seeps into what you think about money matters on the whole. It supports an attitude that’s more focused on instant gratification than long-term planning. Want to upgrade your TV? Sure, the monthly payments are so small and you can afford it. Want to eat out? Sure, even though you could be spending much less if you incorporate some healthy cooking into your week’s meal planning.
This belief about debt also gets in the way of you paying yourself first, whether it’s to a retirement, personal savings, or investment account. You get stuck believing you’ll never be able to build wealth and that it’s only something that happens to rich or lucky people.
4. Spending More Time on Social Media over Money Matters
It’s been a couple of years since this article was first published on GO Banking Rates, but it continues to stay fresh in my memory! A survey found that the majority of Americans prioritize social media over their finances.
Whoa. Picture yourself scrolling and liking…and what this adds up to over the span of a decade. Is this really what you want to be doing with your phone?
Technology itself is not destructive or a time waster. It’s how you use it. Being intentional with how you spend your time will go a long way with how you manage your time. When you reduce or limit your social media usage, you’ll find that you have more spaces of time to catch up on whatever you like (be sure to allocate some of that time to personal finance topics).
5. Feeling Like “Any Job” is Better than Nothing
When you’re unemployed, getting a minimum wage job is something you could feel grateful for.
It’s not something to scoff at because there many people are indeed hardworking, even though they might not be earning a lot.
The trouble with feeling complacent is that it can lead to a false sense of security. The truth is that three to five years don’t take a long time to go by at all. Every single day counts if you’re trying to better yourself, whether it’s through getting a better job, negotiating for a raise, or learning how to start side hustling.
Time is very precious. I can’t tell you the number of times I’ve heard people tell me how “bored” they are. There are so many things to learn at any point in life. Pick up a book! Watch something educational or entertaining on YouTube and see what you can learn from it. An interest in learning is a positive habit to build that can have a huge effect on your levels of motivation and forward momentum.
The Foundation in Your Twenties…
If you’re twenty-something, you may believe you have lots of time and that you can catch up on life in your thirties and beyond. I was the same way too during my early twenties.
I’d like to quote from Meg Jay, Ph.D., a psychologist and author, who urges young adults to “take yourself seriously” during your twenties. Why?
“Because the foundation you build in your 20s will define the rest of your life,” says Meg.
The next time you think you can get away with making big money or personal finance mistakes in your 20s, remember Meg’s advice and the five tips in this article.
