Your 20s are an exciting time in life because there is such a diverse set of life changes that happen during this decade.
You might be in college or graduating. Maybe you landed your first real job. Or maybe you just got a house or got married.
However, there are also big financial decisions that need to be made during this time. Here are some very bad money mistakes that must be avoided at all costs.
1. Getting into debt for a worthless college degree
College is really expensive these days. As a result, you have to make the most of your money. Don’t go after a worthless college degree that won’t get you a livable wage after graduation.
This means don’t major in art, art history, music, or anything of the sort. Now, I’m not saying don’t take art classes in college. But just don’t major in it.
It’s fine to get a minor in one of these areas, but don’t count on it to make you serious money or allow you to retire early.
Check out this list of college degrees to avoid.
2. Not investing/saving money
Investing is the number one thing you can do in your 20s to build long-term wealth and financial freedom. Unfortunately, people push this out into their 30s or even 40s (in the worst case).
The earlier you start investing the earlier you can retire and reach freedom.
I remember when I got my first job out of college. My boss told me the best time to be invested in the market was yesterday! That really stuck in my head.
It doesn’t matter if you invest in dividend stocks or real estate or some other business. Start investing and saving money ASAP.
3. Getting into credit card debt
It is easy to get into credit card debt these days. After all, many credit card companies offer a lot of incentives to get you spending.
However, credit card debt is very expensive! Don’t get suckered into this. Most credit cards will charge 20%+ every month! Make sure to pay off your balance at the end of every month to avoid this dark rabbit hole.
4. Not having a rainy day fund
Having a rainy day fund is really important.
I’ll tell you why.
About a year ago I went on vacation with my family. Everything was good. I had a ton of fun, explored, and tried new food.
Two days after I returned to work, my boss pulled me into his office. He told me they were not happy with my performance and would be firing me in 60 days (right before Christmas) if I didn’t improve.
I should have come out of that office panicking. However, I was calm as a cucumber. Losing my job didn’t really bother me. Guess why?
I had over a year of living expenses saved up. Plus, I had enough passive income from dividends and other online ventures that would pay for all my living expenses if I got fired.
Really bad stuff can happen at any moment. You might lose your job in a bad economy. You might get into a car accident. If you don’t have enough cash on hand, you might be in a bad pinch.
Always keep at least 6 months of living expenses in cash!
5. Playing it safe
When I was younger, I played it safe with my investments. However, being young and practically broke is the best time to take some risk.
I mean what do you have to lose…the measly $1,000 you have in your bank? You can afford to lose 10% of your wealth when you’re 22. You can’t afford to lose 20% of your wealth when you’re 35 and supporting a kid and a spouse.
6. Buying depreciating assets
Buying depreciating assets is a really bad thing when you are young. A car is one of the biggest examples. A car will lose on average 19% of its value within the first year!
I get it, owning something nice for once is a really nice feeling. However, I would recommend buying something else that retains value better (say a high end watch).
7. Going to grad school without a good reason
Going to grad school for no reason is just financial suicide. A good grad school can easily cost $100,000+.
If grad school is not going to advance your career or make you more money it’s just a time and money sink. A fancy piece of paper isn’t going to pay the bills.
8. Watching TV
Watching TV is a big time suck. How many hours do you spend watching TV…maybe an hour a day…maybe two hours?
Well, add that up! Watching two hours of TV a day means you will spend one month out of the year doing absolutely nothing!
Your time would be better hustling and building passive income streams.
9. Trading time for money
What is the most valuable resource of all time?…well it’s time!
Every year I try to be more efficient with my time. That’s why it drives me crazy when people trade their time away for money.
The other day, I found out my friend spent 30 minutes driving across the neighborhood to two different grocery stores to save $1/lb on chicken.
That’s crazy! He spent 30 minutes to save $1? That means he “earned” about $2 an hour, which is less than minimum wage. I guarantee if you start valuing your time like gold, your perception will change wildly.
10. Not reading enough
Alright, I’m guilty of this one…but aren’t we all! Reading is one of the best ways to make money.
Warren Buffett reads for a living and he’s the world’s second richest man. Not bad 🙂
Reading allows you to pick someone else’s brain (hopefully some vastly smarter than you). The most successful people in the world read on a daily basis.
Bill Gates reads about 50 books a year. Mark Cuban used to hit old book stores for fun to check out anything that caught his interest.
I know firsthand how books can dramatically change your life. I read Ben Graham’s The Intelligent Investor during college and it spurred my interest in the stock market.
Getting rich or retiring early isn’t an impossible mountain to overcome. All it requires is avoiding a few common mistakes.
Readers, do you have any other mistakes that other should avoid in their 20s? Let me know in the comments!