“Money is hard to earn and easy to lose. Guard yours with care.” Motivational speaker Brian Tracy said this, and almost everyone resonates with this quote. Money is a universal need because it keeps people equipped, from daily essentials to unnecessary luxuries.
Most people work hard to ensure a better future for themselves, but bills, loans, and other expenses are just around the corner, waiting to be settled. Many young people are unprepared to face the financial trials of adulthood, and, looking back, you might’ve been one of them.
This post covers the top financial things young adults don’t do, which they might have to pay the consequences for down the line.
6 Financial Things You Didn’t Do While You Were Younger
Professionals in their 20s and 30s tend to hustle more but fail in the financial department. Some like to spend their earnings on simple to great pleasures and end up making the common mistakes found on this list.
- You didn’t make a budget or stick to it
Some people believe they don’t need a budget. They try to minimize their spending and assume that’s enough to keep them financially well. But wise financial decisions all begin with a plan. People typically underestimate the power and impact of having a budget.
A budget consists of an estimate of income and expenses for a specific period. It paves the way to financial stability. It helps pay bills, track expenses, and aid in emergency preparedness. Having a budget also exposes bad spending habits and helps in correcting them.
Overall, a budget facilitates financial stability for both the short and long term.
- You didn’t know how to save
Saving money may sound like an easy task to do, but it takes planning and discipline. Most experts advise setting aside 10 to 20% of salary exclusively for retirement savings alone.
However, a Bankrate survey showed that out of 1,000 working Americans, 20% of people save no more than 5 percent of their income, 28% save between 6 and 10 percent, and only 16% save more than 15 percent.
Knowing how to save money consists of recording expenses, minimizing spending, and determining financial priorities. In addition, it significantly helps to include savings in the budget, and there are savings goals.
Not only does this create a clear vision of how much money you want to set aside, but it also becomes part of the plan. There are also mobile apps and tools to help with saving up.
- You didn’t build an emergency fund
Most people are just one accident away from bankruptcy. An emergency fund is a specific type of savings available in times of need. Emergency funds provide a safety net to cover unforeseen costs such as medical accidents or major home repairs, helping you become financially stable.
Don’t wait for life’s surprises or crises to start putting together an emergency stash. It’s better to have excessive funds than to lack them to ease the burden.
- You didn’t use your credit card wisely
Using credit cards instead of cash makes you feel like you are not spending real money. The joy of completing a purchase can occasionally disconnect from the unpleasant feeling of making a payment after receiving a credit card statement. More often than not, the delayed financial consequences result in overspending on credit.
If you face this problem, temporarily or permanently, it’s wise to ditch the credit card and switch back to using cash or a debit card. In this way, you can see the money you’re spending and feel the weight of your expenses.
- You didn’t clear your debts
One of the financial mistakes young adults typically commit is not settling debts. These dues spring from various factors such as student loans, credit card tabs, medical bills, high cost of living, and low income. But there are some ways to clear debt; one is the snowball method.
The snowball method involves four steps:
- List your loans from smallest to biggest, regardless of their interest rates.
- Make the bare minimum payments on debts except for the lowest one.
- Throw in as much cash as you can on the smallest debt.
- Continue until all debts are settled.
- You didn’t save up for retirement
Most young adults look back on their lives and wish they had begun saving for retirement sooner. Having more time allows money to grow at a much higher rate, maximizing compound interest. There are various methods to prepare for retirement, but the simplest way is to use what’s usually available such as a workplace retirement plan.
Financial institutions also offer more complex policies where you can invest and reap more from the plan. Whichever retirement plan you choose, remember it’s best to start early.
Save for Your Future
Preparing for the road ahead may be challenging. There are economic struggles like inflation and insufficient income, while debts and bills keep piling up. But with the right financial planning guide, you can achieve monetary goals and secure your future.
