Have the irresponsible financial decisions you’ve made while in your 20s left you with piles of debt and other repercussions?
Lucky for you, there’s hope!
Here are six of the most common mistakes people make while in their 20s and how to fix them:
1.) Racking up credit card debt
When all of life’s pleasures are just a swipe away, it’s easy to rack up huge credit card bills.
The fix: Manage your credit card use
Create a budget to monitor your discretionary spending. Only spend what you can pay back each month on your credit card and look for a credit card with a low rate. No credit card? Stick to debit or cash only but make sure you stick to your monthly budget.
2.) Ignoring your credit score
Aggressive credit card usage may have handicapped your credit score, making getting a large loan difficult. A poor score will also burden you with an unfavorable interest rate for these loans. Make sure you check your credit report at least annually and know your credit score. The better your score, the more chance you’ll have of getting a loan, with a good interest rate, when you need it.
The fix: Know your score and pay down your credit card debt
Begin by monitoring your score through annualcreditreport.com or sites like CreditKarma.com. Next, work on paying off credit card debt instead of only making the minimum payments. Choose one bill to pay down first and make the largest payment your budget allows. Once you’ve paid it off, work on the next bill until you’ve paid it off and repeat until there’s no more debt.
3.) Skipping student loan bills
When you’re facing a huge debt and have an entry-level salary, it’s tempting to just pretend the debt doesn’t exist.
The fix: Work it into your budget
Call your lender to work out a more feasible payment plan and check if you qualify for a student loan forgiveness program. Most importantly, make payments a part of your debt payment plan so you never miss a payment again.
4.) Neglecting your retirement
Neglecting your retirement means missing out on years of compound interest gains.
The fix: Think of it as a fixed expense
Think of retirement savings as a necessary, fixed expense that must be worked into your budget like rent. Work with the most you can afford and max out your IRA or contributions to your company’s 401(k) plan.
5.) Not having an emergency fund
Scrambling for funds to pay for a large medical expense or to live off of during an unexpected layoff can be a nightmare.
The fix: Start small
Work with whatever you can to make monthly contributions to an emergency fund. Keep your emergency money in an account that offers an attractive earnings rate, but allows you to withdraw funds without penalty.
6.) Not creating financial goals
It’s understandable not to have your entire life planned out yet, but it’s important to set some financial goals.
The fix: Create goals now
Do you want to buy a house within the next decade? Are you hoping to retire by 55? Having a concrete goal in mind will help you manage your money more responsibly.
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