Thursday, 14 November 2019

8 Money Traps To Avoid In Your 20s

8 Money Traps To Avoid In Your 20s

In this article, we're taking a look at 8 pitfalls that people fall into, especially in their 20s and their 30s. I would suggest paying close attention to maybe bookmark this page or take some notes on this. Because some of these could really be beneficial for you.

Generally speaking, people from the young 20s will probably receive some type of influx of cash, maybe you just graduated college or you've been in the workforce for quite some time. But hopefully, you're starting to see some more pay increases while having fewer responsibilities.

Maybe you don't have kids, you don't a lot of expenses and a lot of a whole mortgage to pay. So if you're in that situation then you want to avoid some of these situations that can end up costing you a lot of money in the process.

Let's Get Started


1. Expensive Relationships 

Spending exorbitant amounts of money on relationships. I want you to hear me out on this because, first of all, the money aspect of relationships should be down on the important things in a relationship.

But if you're going to try to spend money to impress somebody, especially if you're on a lower income and you're trying to take them on like $300 dinner dates and thousand-dollar weekend trips and buy them jewelry and everything. If you're going to try to do that and it's not sustainable. You're creating a false image of yourself and that's probably not a good look for the long run.

Read: How To Save Money (6 Easiest Way)

If you end up running out of money and you're making them expect that from you because you're buying them a lot of stuff and then one day you say I can't buy anything anymore because I spend all my money. It's not always the best situation. 

I'm not a relationship coach, so I'm not going to give too much advice on that. but I just want you to be aware that spending a lot of money on people is not always the most important thing.

There's like a thousand other things that are more important than spending money on other people. You want to think about that. Because it can kill people's wallets when they try to look cool and rich to impress somebody. It's not always the best option to take.


2. Not Spending On Their Passion

I'm not taking money into the grave with me. Once I'm dead, I'm dead. And because of that, I like to spend money on my passion and for me personally. It's traveling, I like traveling. I was just over in Europe and I'm in Israel, I'm going to Amsterdam next week. And that's because I'm able to set money aside to spend on things that I actually want to spend it on.

I would suggest you doing that for yourself as well, a lot of people spend money on different things but at the end of the month, they don't have any money left over for their passion. Maybe you love music and you want to buy a nice Martin guitar, maybe you want to buy a camera, but you don't have the money for it, because you've spent it on different things.

Start setting money aside for your passion. Maybe create a separate bank account, I don't care what you do but put money aside so you can spend it on things that you want in your life. That's why I write this article in the first place, I don't write it so people can just be a Scrooge and have a pile of cash on their desk.

If you're looking at a pile of cash, it's not going to do anything for you, sure it might look like a lot of money but if you're not spending it, what's the point. 


3. Thirty-Thousandairs

30,000 airs are people who are making less than $100,000 per year. but they're walking into a bar trying to buy out the bar, put drinks all around for everybody, spending a lot of money when they go out. Essentially trying to look rich, trying to look like they have a lot of money than they have at the moment.

There is this idea of faking it until you make it. And that actually does hold true to an extent. But instead of buying out a bar, maybe think about other ways to fake it till you become it. For example, buying a nice suit, buying a nice watch, getting nice shoes, getting a nice haircut. Taking care of yourself and being formal and professional can have a much greater effect than going to a bar, getting drunk and spending a lot of money on people.

While alcohol might be fun and it's a social lubricant, it's also a big lubricant on your wallet and you end up spending a lot more on that. Think about ways to cut back on that potentially, maybe consider drinking before you go out to the bar so you're not spending $200 on drinks at the bar.

Those are just some tips because I know 20-year-olds people like to have fun, and it's important to have fun, just make sure you're doing it correctly without blowing all of your money especially on the weekends because that happens to a lot of people.


4. Avoiding 401k Opportunity

The worst pitfalls that people fall into as a millennial, as a 20 or 30-year-old is by not taking advantage of the 401k opportunities, by not putting money into their IRAs. And if you're in a different country, essentially just not putting money into your retirement accounts.

When you're in your 20s it's not cool to be thrown money into your retirement account, you think I'm not retiring for 30 years or 40 years from now, I'll think about it later.

But trust me, if you ask anybody who is in their 30s or 40s and you say, do you wish that you put more money into investments when you were in your 20s, a lot of them are going to say yeah I really do, because I'm playing catchup and I'm trying to catch up and put a lot of money in my 30s and 40s, instead of being proactive about it.

Taking some of your income and putting it into investments, especially if you have a 401k offered by an organization, your company, and they're offering to match some of your contributions. I would personally take full advantage of that, I'm not a financial advisor, so you can do what you want, but I would personally take full advantage of that because that is free money if they're matching your inputs.


5. Speculative Investments.

Dropping a lot of money on a speculative investment. I personally fall into this category in the past, and maybe you have as well. But people who are in their 20s, 30s, you might get some hot stock tip or some hot cryptocurrency tip, and you think about getting into it and dumping $10,000 into it because you think overnight you might make $100,000. And that would be life-changing.

There's a clear difference between investing and speculating. And that's the first chapter of the "intelligent investor", one of the best investing books of all time.

It's important to ask yourself, am I investing or am I gambling on this. You need to understand your reasoning for getting into any of these particular investments. We just talk about the importance of investing, but you want to make sure you're doing it right, and you're limiting risk and increasing the potential reward. That's what investing is all about.

What I personally do, if I find myself about potentially getting into some type of investment on a whim, I'll take out a piece of paper and a pen, write down the pros and cons, the risk, the rewards, and why I'm trying to get into this, other than just rich, especially get rich quick. You want to be careful about that. Sometimes there can be some good deals, sometimes you can get a nice stock tip that could work out well. But you need to understand why you're getting into it.

If you can list a lot of reasons and a lot of the cons behind it and understand the risk and rewards then maybe that's something you could consider getting into, but I just want to caution you on that because I've seen people lose a lot of money.


6. No Money Down Plane

No money down for a mattress, you only have to pay $40 a month the next 4 years for this $4,000 mattress. But the issue with this is that, first of all, you're paying probably 10% APR or higher on all of these small loans. But they do add up especially when you get baited into a bunch of different no money down plans.

You got a new mattress, $40 a month, a new dishwasher, $25 a month, you get a laptop and you get that on zero $0 down for the next 3 years, you get the iPhone. And you end up having like 6, 7, 8 of these different bills that might seem small like $40 a month or less, but they can add up and start to pinch your wallet.

You're getting a couple hundred dollars a month that you owe to all these different organizations and you're probably paying a decent amount of interest on that. What I would consider doing, just buy it in cash, and if you can't afford a nice mattress, then maybe you should get a less expensive mattress instead of getting expense one for like $30 a month or $40 a month.

As Clark Kent has said in the past, I heard one of his videos, he said look, if you can't afford to buy 10 of an item, maybe consider not buying one of that item. It's a good rule to live by so that you end up not spending too much money on something that maybe you can't afford.


7. Buying New/Luxury Cars

Cars keep people poor. The average cost of owning and operating a vehicle according to the Bureau of Labor Statistics is about $9,000 per year. Buying a new car, buying a luxury car when you're in your 20s, is not a good move for the majority of people. That's because cars are depreciating assets, they're losing value every year.

If you buy a new car from a dealership and you want to return it a week later, sell it back to the dealership, you're going to get offered at least a couple of thousand dollars less on that vehicle. Possibly even more, just because you bought it, it's in your name and you're selling it back to the dealership, they're not going to give you a lot of money for it and instantly lose money.

I would suggest buying vehicles that are at least a couple of years old. If you live in a big city that has a lot of public transportation, you have no need to use a car very often, then I would consider not even having a car if you don't need one.

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