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Four Simple but Costly Money Mistakes

Whether you’ve been on your own for a few days or a few years, try to avoid these common money mistakes young people make. Already made them? Don’t be hard on yourself; chances are you just didn’t know better (a big part of money smarts comes from learning from your mistakes).

1. Ignoring Your Finances

Have you ever been driving when your car suddenly starts to make an awful noise? Are you the kind of person to pull over and pop the hood or call your mechanic? Or would you just turn the radio up to drown out the sound?

If you answered turn up the radio, ask yourself honestly: Do you also try to forget about your finances?

It’s a common problem, especially when things aren’t in good shape. Hey, not everybody loves budgets and mutual funds, but ignoring things like debt and overdraft fees won’t make them go away. Plus, when you take the time to get a handle on your money, eventually you can set things up so that your finances run more-or-less automatically and you can forget about your money—this time, however, knowing that everything’s running smoothly under the hood.

2. Putting Off Until Tomorrow…

…what you can get done today. Yes, I mean procrastinating. If you often waited until the night before the due date to start writing school papers, chances are you will be prone to putting off money decisions, too. The sooner you do the following, the better:

  • Start an emergency fund (so you don’t get caught by a big surprise expense)
  • Set up a budget (so you can learn where your money is going)
  • Start saving for retirement (and take advantage of compounding interest)
  • Get rid of your debt (so you can stop losing money on interest!)
  • Pay your bills on time (so you don’t ruin your credit)

3. “Doing Debt”

So, you want to get your own place, drive a new car, and take a “well-deserved” trip abroad. Don’t we all. But can you afford it?

For many twentysomethings, the answer is a simple “no”. It’s not your fault you’re not made of money yet; you just graduated, you’re starting out on the bottom of the salary ladder, and you’ve only had a few working years to save!

Car loans and credit cards make it easy for anybody—even a 22-year old intern—to live a lavish lifestyle…for a while. Sooner or later the bills will come due. You’ll be losing hundreds or thousands of dollars in interest every year and scrambling just to make ends meet each month.

The simple advice? Going into debt is like smoking; it’s best to never start, because quitting debt is very, very hard. Use cash for everything or pay your credit cards off in full every month. If you’re already in some debt, stop the cancer before it spreads and make a plan to get out of debt now.

Following sound personal finance principles is not rocket science, but each step is harder than it looks and it’s easy to procrastinate.

4. Forgetting About Retirement

On the day you get your first “real job”, you should open an individual retirement account. Thinking about retirement on the day you start working sounds silly, I know. But did you know that if you invested a few thousand dollars a year from the time you are 22 until you turn 32, it’s possible you could never save another penny and still have enough to retire on when you turn 65?

That’s the power of compounding interest. The sooner you start—no matter what the amount—the better. And yet, most of us don’t start contributing to an IRA or 401(k) until our late twenties or even early thirties.

Without a doubt, saving for retirement can be intimidating. To learn more, read 23 things beginners absolutely must know about saving for retirement.

Published or updated on December 14, 2009

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About David Weliver

David Weliver is the founding editor of Money Under 30. He's a cited authority on personal finance and the unique money issues we face during our first two decades as adults. He lives in Maine with his wife and two children.


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  1. David Weliver says:

    A valid point, Edwin. I’ve usually been of the philosophy that one should start putting *something* away for retirement to get in the habit of doing it, even if you still have debt.

    I would hope that investing in stocks wisely would beat 6.5% over the long run, but it may not beat a higher credit card interest rate.

    Debt Free Adventure has a great article debating exactly this topic today: Debt Reduction vs. Retirement Savings.

  2. Edwin says:

    When it comes to retirement savings, I would first recommend paying off student loans or other debts accrued during school.

    This particularly applies right now where you might have a 6.5% interest rate on your student loan debt but would be lucky to squeeze that out of an investment.

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