10 Money Mistakes to Avoid in Your 20's

[Music] hello how's it going in Solano today we're doing a video that's a little bit different from my other videos but I've been wanting to make this for months it's important for me should they share it's an important conversation to have that I just don't think people my age or at least in my sphere talk about nearly enough and today we're talking about finances you're new here I'm 23 I'm fully financially independent I happen for the last like 1 or 2 years I got my undergraduate degree in business back in California and now I live in New York City I do social media full-time as well as I'm meeting consulting and that's that's me while I'm not like a financial advisor or anything along those lines I don't feel like I don't see enough people my age really talking about things like this and so I figured in order to hopefully help you guys if you're in similar places me I did a lot of research compiled a bunch of things I found and kind of tried to simplify it down to hopefully give you some good tips moving forward so without further ado these are the financial mistakes to avoid in your 20s so number one is save for retirement into the earlier the better this one is like near and dear to my heart I opened up my Roth IRA or Roth IRA when I was like 19 or 20 in 2016 as a sophomore in college my brother recommended that I open it up and after doing research I was like this sounds like a very good I did it do the biggest thing we got going for us in our 20s is time and the sooner that we start saving and investing for the future the greater the payoff is gonna be so without getting too technical here it's all about the power of compounding compound interest is the time value of money so the earlier you put coins into our time' fund the longer it has time to grow let's say you are about 25 years old and you decide to invest $100 a month into a Roth IRA that earns a 12% annual return so let's say you do this for 40 years until you're 65 when you retire at 65 that amount of money will be close to a million dollars a million dollars so the same person were to start investing $100 a week about thirty-five until you reached age sixty-five and retire then that money would only grow to about three hundred thousand dollars which means you lose 700 thousand dollars within that time span and that is the power of investing in retirement fund earlier and let it grow over time so if you are working a nine-to-five salary job check and see if your company offers a 401k it most likely does a lot of companies offer a certain matching percentage the amount of money that you invest in your 401k which means that they're literally going to give you free money so there's no reason to not jump on that you gotta make sure you maximize what they match a lot of companies offer up to fifty percent of what you're putting in so let's say you got your salary you put five percent of your salary towards your 401k that means that the company that you're working for will not two point five percent as well so it could be thousands of dollars that that company is matching for your retirement and if you don't act on that you're literally like wasting an opportunity to make and save more money even if you don't have a salary job you can still start a retirement fund to save for your future and start putting away those coins when I was in college I think I tried to put away fifty dollars a month and maybe some months a hundred but that was really difficult for me but even that small amount really is gonna add up over time and now that I'm making more money and have like more of a full-time salary I'm able to put in a lot more and see that grow over time so start your retirement do it now it's worth it promise [Music] next is to have an emergency fund this is super important I feel like I was like a 20-something it's really easily to feel like I have nothing's ever gonna happen to me but you need to have an emergency fund money set aside to cover any expenses when like life throws crap at you so you don't get into debt it could be anything from a medical expense or like a car crash or you lose your job and you need money set aside for those emergencies or the recommended amount that came up a lot when I was researching was about $1,000 and to start there ideally you have up to three months of your salary saved up you should build your emergency found over time and maybe start with one month salary and then slowly build up to three months salary and you've been six months salary so you got that little nest egg for when at times of trouble come around so doctor talking about credit cards and for one I recommend getting a credit card but obviously to do not get any credit card debt so I feel like as a like millennial gender I always kind of grew up with hearing this narrative I like credit cards are bad like don't get into debt etc which is an important thing to hear but to the point where I was like super scared to even get a credit card and many of my friends were as well and we waited a really long time to open our first credit card but the problem that the older you get you need a credit card to survive in life and so for example for this apartment I didn't have a guarantor so I signed the lease on my own and I had to prove that I had a good credit score so thank goodness I signed up for a credit card like two years ago and I built a good credit score over time so I was able to get this apartment within getting a credit card there are a lot of benefits you can get travel points you can get hotel points I like literally gone full covered airplane rides a via the points I've made through credit card purchases but obviously with that massive disclaimer don't get yourself into debt the way I view my credit card is as if it's a debit card so I don't look at the like a lot of credit that I access to of like thousands of dollars I just see it as like this is like my debit card I'm only gonna put on there why I need to and what I already have the money to spend so I can paid off within the month so I put like my groceries on there and also with staying within a like smallish utilization rate of the credit card which is like another thing you have an amount of money you can spend on your credit and you only want to spend within a certain utilization rate of that credit amount that you're have access to often your first credit card to has a very small line of credit so might only have $500 which is like a very small amount for a credit card but I kept that up for a year kept a really good score on it and then within a year I opened up a new one that would give me a lot more benefits that's up any kind of debt especially credit card debt comes with interest so the amount you spend and you don't pay off just grows and grows with time so spend within your means you're young you don't want to get into a ton of debt that's gonna follow you throughout your life and hold you back with the things you want to do the next step is don't spend too much on rent again as I was reading I found this quote from this study that said younger adults are spending a stunning amount of my unread sucks up about 45 percent of their income during this first critical decade in the workforce what is a lot of money so kind of diving into like background on that there's this like very famous budget role it was actually popularized by Elizabeth Warren and it's the fifty thirty twenty rule this rule basically states that you should spend 50% of your after-tax income on your needs and obligations that you have to do so this includes rent groceries transportation bill but your living expenses and essentials so next is thirty percent so is everything like outside of the essentials so like eating and drinking with friends getting a face mask traveling excited and that the 20% is saving and paying off debt payments so that's the 50 30 20 and real what you think is a great thing to abide by and then there's another really popular rule with like back from 1970s it's a little outdated but I think it's something that a lot of people still adhere to so the 30% rule says that you should ideally not spend more than 30 percent of your monthly income so let's say you make 5,000 baht a month you shouldn't be spending more than $1,500 a month of rent make sure you're looking for places within your means it's just an important tip especially for your young 20s next is to not buy a new car and I learned this one also from my brother so shout out to Courtney for giving me all the money tips this one doesn't really apply to me in this moment because I don't have a car and I just recently sold my car which was my baby it was a 1999 Honda CRV I loved her behind and new cars one of the worst financial decisions you can make because your car depreciates so much once you drive it off the lot a car in general is a depreciating asset which means that over time and just lose more and more value a.k more and more money that's best to buy a car that's several years older that functions well that you could just drive into the ground you don't have to pay insurance and interest on a new car loan and often for a new car it's more than foods for a used car so basically just never buy into a car always try to buy a used car it's just a much better investment next it is always price compare groceries food furniture clothing don't just reach the first thing you see and go from there again we're young like we don't need the nicest furniture or clothing or like the bougie is best food from Whole Foods chances are that the apartment we're living in right now we might be for one to three years this isn't our like forever home it doesn't make sense to decorate as such of course make your place cozy but you don't need to get the nicest couch I'm all about using apps like offer up or let it go to find things secondhand whenever I go to the grocery store again this is something I learned from early age was to always like price compare they could be saving just even two or three dollars by looking to see what deals are going on the difference between the like main brand and the off-brand item and while I may seem kind of futile because it's just like one or two dollars those water two dollars adds up and over time can become a large amount of money and I think it's good to just learn those the kind of shopping principles now and take those forward with you throughout the years next is spend like you're broken fast like a businessman I feel like it's easy to go from like college broke mentality like oh I'm making a salary job and be like I can spend all this coin now it's another thing I see friends doing it's easy to be like I am broke and I can barely afford to pay for right like oh now I'm making all this money I'm gonna go buy those $200 pairs of shoes so I think there's a lot of value and kind of holding on to a much more frugal mindset if you want money and longer I mean if you want to have a good savings again vesting is very important that could look like investing in your attire that cannon look like using something like the Acorn app to make small little investments eating out a lot as expensive drinking and going out on the weekends it really adds up those are all just things to keep in mind because again every dollar counts next is create a current budget it's so important to be aware of your cash flow I'm like where your money is going I don't do well of having a very specific allotted amount for like different sections but I'm always always aware of my cash flow so I use mint which basically allows you to go through every single expense you've ever made and it categorizes it so down to the dollar I can see where is my money going I like to review at the end of every month and make a spreadsheet and put the final amounts into different categories so I can know exactly where I spent my money and to be able to kind of see where I can cut back in the future otherwise it's so easy just kinda like tap out and just give your credit card or your debit card over whenever and not really know how or where you're spending so definitely create some type of budget and manage and view your cash flow next is diversify new revenue streams this might not apply to everyone necessarily but let's say you do have a really big financial goal you're trying to pay off into the debt or you just don't have a super well-paying job and you want to put aside money look into some type of sign wholesale to make more money there's so many different odd jobs in line maybe in the say that you're living where you can make a few extra dollars if you're willing to give up certain evenings or weekends depending on what your schedules like like anything from dog walking to bird driving to going online and offering services as like a graphic designer I was really inspired by following Asia Danes journey to becoming debt free one thing that I was really inspired by was the fact that well she had you know like a significant job she was still doing all these little side jobs I mean who aren't making as much money but she was so committed to paying off her debt that she was willing to diversify our revenue streams do these little side hustle gigs in order to save up depending on your job isn't it's security it's important to not just be dependent on one single stream of revenue okay next is not setting financial goals this is something I'm definitely working on so speaking of some people older than me to get some of their tips one of them was to set some like more specific financial goals because if you never stop to think about what you want accomplished in five or ten years chances are you won't really accomplish anything by the end of that time period I feel like there's a lot of power in the very act of identifying a certain goal and starting to save in your 20s that will for one build a really good practice of learning to save for something specific but also help you accomplish something big like maybe saving for a nice car or investing in property trust me you can never save enough it's not about having this like crystal clear idea like I want this exact thing it's more about setting goals and prioritizing things that you might want down the road and then the last which is a little cheesy but I think is an important one when it does come to spend money be wary about where you spending your money and try to invest in the things that you obviously like reap benefits from and will bring you joy and also cheesy and cliche for me like I said I'll see friends buying like $100 200 on pair of shoes it just crazy but I feel like I see a lot more people doing if they need to expect I personally would rather take a portion of that money and invest it in a gym membership and focus on my health and physical and like mental well-being a lot of people go on the weekends and will kind of haphazardly spend a ton of money by eating at brunch and dinner and going out for drinks might as well take a portion of money and spend it on a ticket go travel and see the world but I do feel like there's so much value and investing in like experiences or if you want to like grow a skill or a hobby over a materialistic good that again is like a depreciating asset investing in those things that are going to bring you a little bit or joy so those are all my tips of things to avoid and learn from as you go about trying to figure out money and finances in your 20s I know it's like really confusing and hard and they don't take - enough about it at school and I am still figuring it out those are some steps in my own life that I really try to take also - there's a wealth of knowledge out there for free via podcasts and books I can leave some stuff in my description below if you want to continue to do research and learn on your own which I highly would recommend so yeah I hope you guys enjoyed I hope that was interesting and not too dry and hopefully informative thanks so much for watching until next time [Music]

Channel: Elena Taber

Views: 432,707

Rating: 4.9737797 out of 5

Keywords: money mistakes to avoid in your 20s, money mistakes to avoid, money mistakes in your 20s, money mistakes, financial mistakes to avoid, money mistakes to avoid in your 30s, money traps to avoid, 5 money mistakes to avoid, how to save money, biggest money mistakes to avoid in your 20s, 5 money mistakes to avoid in your 20s, mistakes to avoid in your 20s, biggest money mistakes, money tips, money, finances, save for retirement, investing, adulting

Id: deFEsbvfHxk

Length: 14min 28sec (868 seconds)

Published: Thu Feb 06 2020