Leaving your 20s behind can feel like a call to be more responsible, a more full-fledged “adult” than you were in college and those first years on your own. Many articles suggest trips to take before you turn 30. Our advice? Don’t worry about booking vacation flings before a birthday deadline. Those countries will stick around. What’s more important is leaving some of the mistakes of youth behind in your 20s, like these iffy spending habits.
1. Slacking on Retirement Saving
This isn’t technically a spending habit, but it is one of the most impactful financial habits you can develop in your 20s. Putting off retirement saving until later, or contributing a bare minimum amount, sacrifices more money than it seems at first.
The effects of compounding mean the earlier you put money into a retirement account, the more each dollar grows. One calculation from Vanguard showed that saving $10,000 annually from ages 25 to 40, at 6% annual return, resulted in a higher final balance than saving the same amount from ages 35 to 65.
2. Spending Beyond Your Means
A thorny challenge to navigate in your 20s is hanging out with friends who earn very different amounts. The urge to keep up can lead you to spend more than you can afford. Top earners also aren’t exempt from overspending, either, especially if they believe their high salary covers more than it truly does.
Regardless of the amount that you earn, create and stick with a reasonable and achievable budget, one that includes a savings plan. Unexpected expenses happen, and living right on the edge of your means will leave you unprepared to handle them, no matter how much you make.
3. Paying Bills Late
Ignoring bills, even for $10 or $20, can negatively impact your credit score. Companies may even send your account to collections over a small amount that goes unpaid.
Late payments and delinquent accounts lower your credit score, making it harder for you to take out loans or get the best rates in the future. If you’re struggling to pay bills, you may be able to discuss a payment plan with the company. A financial counselor can also talk over your best options to get back on track.
4. Paying the Minimum Balance
Similarly to paying late, paying the minimum is a common mistake that can lead to wasted money and lengthy repayment (which can even mean more chances to miss a payment, which can impact your credit score). The posted minimum balance often barely clears interest accrued on the debt. Even a relatively low amount can take years to pay off going on minimum monthly payments. Once you add all the interest to the initial amount you spent, you probably would never have made the purchase in the first place.
If you find yourself only able to make minimum payments, keep paying them on time to avoid further credit damage. Contact a credit counselor or other financial advisor ASAP to learn better strategies to pay off balances.
5. Mindless Spending
List every purchase you made three weeks ago. Can’t do it? We’re not surprised. A smoothie here, an ebook there, and a hostess gift to bring to a friend’s party–everything adds up. Budgeting apps are designed to help you capture incidental expenses before you come up short on rent.
6. Skipping Insurance
In the short term, going without insurance sometimes feels like it makes sense. Young people often feel nearly invincible when it comes to health. Or you skip renter’s insurance because you know you won’t forget to lock your doors.
Living without a safety net can turn out to be a disastrous mistake. Twenty-somethings aren’t immune to car accidents, illness, injury–or the astronomical bills that come with it. Cover your home, car, and health, at minimum, so a broken leg doesn’t bankrupt you.
7. Paying for Things You Don’t Use
Sometimes, purchases fit a person we want to be more than the person who we are. The gym won’t stop charging your account just because you stopped going after the first two weeks of January.
A few times a year, go through your credit card, PayPal, or other account statements to confirm that you’re using everything you’re paying for. A $10 monthly app subscription, $25 premium social media account, and $5 magazine could waste hundreds or even thousands per year if you’re not using them.
8. Going Overboard on Sales
Retail companies are experts in separating you from hard-earned money. Attractive displays, “blowout” prices, and a “free” gift if you only spend a little bit more are just a few gimmicks stores and marketing companies have created to lure your credit card out of your wallet.
Remember: No matter what the sales associate says, it doesn’t matter how much you saved. It matters how much you spent. Buying a $400 jacket for $100 only makes sense if you have $100 to spend, comfortably, in your budget.
9. Ignoring Financial Red Flags
Managing money can be stressful. No one likes looking for mistakes. But ignoring financial documents and credit checks can lead you to miss red flags like overdrafts, inaccurate entries on your credit report, or important information about any debt you carry. Facing problems head-on, as early as you can, may help you solve them before you end up under a pile of debt.
Make this year your time to educate yourself about money. Whether you make your first budget or learn basic investing skills, informing yourself empowers you to tackle problems promptly and get the best value out of your money.