Being broke is never fun, but some can argue that it’s the only real way to learn about money. I tend to agree because that’s how I learned. I made a lot of money mistakes in my 20s and I’m a better person because of them today. However that’s not to say that if I had learned about debt, spending and saving at a young age that I wouldn’t still be a great person.
If I didn’t rack up a bunch of debt in my 20s and leave it there until I was 30 my life would have been totally different. I probably would have started travelling a lot sooner and I would definitely have more savings today. However because of what I went through I now have a strong work ethic because I had to get several jobs to pay off my debt, I understand the value of money because I had to work very hard to pay off all my debt and I am financially responsible because I’m deathly afraid of going back to being broke.
The time to make mistakes is when you’re young. I don’t believe anyone lives a perfect life. Mistakes are a part of growing up and becoming the person who we want to be. The key is to make the mistakes, learn from them and don’t repeat the same mistake several times.
It’s a lot harder to overcome financial difficulty when you’re older, so if you have to learn about money the hard way I say make these money mistakes in your 20s.
Accept every credit card offer in the mail
Having several credit cards doesn’t make you an adult. It also doesn’t make you financially responsible; just the opposite actually. In all honesty 20-somethings don’t really need more than one credit card, if you do then you probably have some money management issues.
If you find yourself with several credit cards in your 20s pick the best one and cancel all the others. The best credit card for you could be the one with the lowest interest rate or the most generous cash back rewards, it all depends on what you need.
Rack up your debt and max out your credit cards
Classic mistake of a first time credit card user. The good thing (if you can say that) about having a lot of debt in your 20s is there is time to pay it off. You’re young and full of energy and most likely have the stamina to get a second or third job to help pay off the debt. This is harder to do in your 30s or 40s when you have several other financial obligations like a mortgage and car payment as well as people depending on you like your family and kids.
Make only the minimum monthly payments
This is a common mistake made in your 20s because you may not have a lot of income. Some people are still in school and some others are just starting out their careers at low salaries and lots of student debt. Many people think that making the minimum monthly payments is O.K. to maintain their credit score; this is true, but it doesn’t help improve it.
The credit bureaus take your total outstanding balance versus the credit limit into consideration when determining your credit score. Even though all your accounts may be paid on time, high balances can be a hinder.
The good news is that none of these habits are extremely devastating to your financial well being and with a little change in your habits they can be overcome. If you’re going to make some money mistakes this is why it’s a good idea to make them in your 20s.