Most people in their 20s are newly on their own, working, and figuring out how to be an adult. While making mistakes along this new path is inevitable, few millennials are focused on financial independence, and saving for retirement is rarely top-of-mind. Since few of us like to take our parents’ advice, we asked top young financial professionals what mistakes they made and how to best get ahead in the financial game. If they could relive their 20’s these are the pitfalls they’d avoid:
Not Starting To Save for Retirement
When you are young and just entering the workforce, nothing seems farther away than retirement. A survey from Bankrate found that 69% of those ages 18-29 had no retirement savings at all. Financial planner Steve Branton stresses the importance of starting to invest in your future by taking advantage of your company’s 401k matching program and/or opening a Roth IRA account. By starting to save for retirement in your 20s, interest compounding is in your favor so the earlier you start the better. With only $100 a month, starting at age 25, with a modest return rate of 8% and quarterly compounding, your money will have grown to $349,039 by age 65. And if you have the money auto-deducted from your paycheck, you won’t even miss it.
Opening Too Many Lines of Credit
Nowadays it seems that around every turn there is the promise of fabulous discounts if you just open another credit card. From Amazon to Target, they lure you with instant savings, and within minutes you can receive yet another line of credit - and another debt. While you may think that you are getting a great deal receiving 25% off your entire purchase, as financial advisor Sabina Lowell will tell you, opening too many lines can do major damage to your credit. Keep your credit under control by monitoring your credit and spending. The best way to build a strong credit history is to pay all your bills when due.
Not Discussing Finances with Your Significant Other
In your 20s you may be starting to get into more serious relationships or even be considering marriage. Many people shy away from discussing financial matters with loved ones finding it awkward or even rude, but as financial advisor and certified life coach Holly Gillian Kindel can tell you from first hand experience many financial problems can be avoided by talking about your finances with your significant other. Everyone has different financial views and to avoid a lot of unnecessary struggle its best to lay the cards on the table sooner rather than later.
Paying Off Low Interest Loans Too Quickly
All twenty-somethings have grown up being warned by their elders of the perils of getting bogged down by endless student debt. While it is well-advised to start tackling your debt as early as possible, many millennials start putting all their extra funds towards repaying these low interest loans and don’t consider other investment options. Steve recommends finding a good balance between paying off low-interest loans and channeling some money into other investment options.
Avoiding Investment All Together
Just because you did not major in Economics or Finance in college, doesn’t mean you should be afraid to test the investment waters. To those of us who are not too certain of the difference between a bond and stock, the world of investments can seem confusing, dull, and something only old people like your parents need to deal with. However, the earlier you invest the more time your money has to work for you. Just be sure to consult a professional to make wise choices!
The world of personal finance can be a tricky place; especially in your 20s. Whether you are new to managing your own money or already have investments, everyone could use a portfolio tune-up and some professional advice. Sign up for the Mosaic Financial Fitness Challenge to see how well you are preparing for the future and explore ways to enhance your investment health! Learn more here: