You are into your twenties and you have just started to earn. This is the first time in your life when you can fund your own needs and there is no need for you to ask for any money from your parents. These can be very confusing days. On one side you will be itching to go for regular vacations, regular movies, and regular eat outs with your friends and on the other side you will be thinking of how much to spend and how much to invest. Giving an answer to this question is very difficult, it is strictly on an individual to decide about how much to spend and how much to invest.
Here are some common financial mistakes which an individual makes in the twenties
No contribution being made towards retirement – As soon as your professional life starts, you should start investing for your retirement as well. Delaying the contribution for your retirement is a big mistake which a people in their twenties make. Eventually when the age increases, the responsibilities also increases and contribution towards retirement takes a back seat.
Buying a car which is more than your status – A common mistake that the people in their twenties make is buying a car which is well beyond their status. First and foremost you should try and use public transport. But if you are still buying a car, you should make sure that the car you decide to buy is as per your status. Buying a car more than your status will mean that you have to pay higher EMIs, also the maintenance cost of such cars are high. This means you will not be left with much, in your hands for investments.
Not starting an emergency fund – An emergency fund is a fund where a person is advised to keep an amount equivalent to his/her six months expenses at any time. The idea behind maintaining an emergency fund is to safeguard you against the sudden loss of job. In case you lose your job, you still have money in your hands to run your house till the time you find a new job. Also if there is no need to utilize the emergency fund then it acts as a money accumulator fund for the people in their twenties.
Excessive use of Credit Cards - Living high on your credit cards is a dangerous game to play with your finances. At some point you have to pay for your purchases, and that usually means emptying any savings you have accumulated. Living on your credit cards will teach you to live paycheck to paycheck, which is a very difficult habit to break once established.
Failing to set financial goals - If you never stop to think about what you would like to accomplish in five or 10 years, it is likely that you won’t accomplish anything by the end of that period. On the other hand, the very act of identifying and setting financial goals for yourself in your 20s clarifies your choices and helps you naturally focus on ways to reach your goals.
Not exercising the habit of paying yourself first – Even if you are good money in your career, still you should practice a habit of saving a particular sum of money from your income for your future before paying your bills, and other expense. This develops a habit of savings in you, this habit of saving helps you create a huge corpus of funds which can be used post retirement.