‘5 financial mistakes I wish I avoided in my 20s’

If only. These two words have the ability to make you feel wistful or guilty. If only I took care of my health in my 20s. If only I didn’t spend all that money on eating out. If only I quit my job and gone for the brilliant business idea I had 5 years ago. We’ve all had our “if only” moments in life. But the one area in our lives where “if only” hurts the most is our finances.

While it is never too late to take control of your finances, if you’re in your 20s and you do things right – you can fast-track your way to financial success.

20’s is all about new life experiences, adjusting to a lot of new things and growing up. Finishing college, starting your first job, becoming independent, having your own house (rented or mortgaged), paying your own bills, getting your first car. It can be nerve-wracking, exhilarating, and riddled with roadblocks and mistakes (which are avoidable in hindsight).

For most people, in the midst of so many things, how to handle your finances isn’t really on top of your priority list. But when you’ll reach your 30s and look back, the “if only” will only bring regrets. We all know we cannot go back in time to fix those mistakes.

So instead of regretting, why not avoid these money mistakes in your twenties and be on top of your finances?

1. Let your parents or partner manage the money without your involvement

I get it. If you’ve not handled investments before it can all seem intimidating. But that applies to everything in life. If you’ve never done swimming, it can seem intimidating. If you’ve never used a video editing app, it can seem complicated. But once you learn the basics, it’s not that complicated. So is the case with money.

Unfortunately, most people, when they enter real life, don’t know how to deal with money and leave their investment decisions to their parents, some uncle, a friend working in a finance company or bank, or worse, don’t invest at all. That’s the worst mistake to make. While most things in life are best delegated (so you can focus on what matters the most), it doesn’t apply to your finances. Your life situation is different from others. Plus, you wouldn’t want to make the same mistakes that your parents or friends made. Besides, at some point, you’ll need to eventually learn to handle your own investments. So why not learn early?

Set your financial goals and take charge of your own investments, while learning from your parents (friends, uncle, or whoever else) and getting the help of experts.

2. Living beyond your means

It may not seem like a big deal when you pick up that double-mocha frappuccino every day, get your hands on the latest iPhone, try out new restaurants, order-in instead of cooking, or pick a new outfit for every “it occasion”.

And then scrolling through Instagram checking out the shopping hauls and your friends’ tropical vacations doesn’t help. It’s almost too easy to blow your budget on emotionally driven impulse buys. But every little expense adds up.

Saving may sound old-school and cliched. But the best money advice you can ever get in your 20s is to start investing early, set a budget, don’t get carried away, live within your means, and leave some room for savings (and also for your guilty pleasures). After all, life is all about balance!

3. Not having an emergency fund

An emergency doesn’t knock on the door looking at your address, age, or profession. From losing your job to an unexpected illness, unforeseen circumstances can strike anyone. An emergency fund can protect you from crippling debt and give you peace of mind while facing stressful situations. So set aside a small amount every month and create at least three months’ worth of salary as your emergency fund.

4. Getting into a debt trap for a luxury ride or that fancy couch

You’ve finally got a good job, and now you want to get that fancy car you’ve been eyeing for years. Or perhaps, get that perfect couch that you can afford with the EMI plan offered at the store. It may seem fulfilling but it will put you into an endless debt trap.

Instead of frivolous spending, use that money to create an investment portfolio that will help you get everything you want (without any debt or stress).

5. Relying on credit card debt

Credit cards have their pluses. They’re more secure when it comes to fraud protection. They give you the ability to earn cash back on everyday expenses such as groceries, and fuel. Give you travel benefits like air miles on every spend, free lounge access, and airport pick-up and drop-off. Using a credit card is also a great way to build your credit score.

But the moment you use them for taking credit, aka financing a lifestyle beyond your means, it can lead to a cycle of compounding interest and debt. If you can’t pay off the amount you spend every month, you’ll be buried in the snowball effect. So be very disciplined with your credit card spending, and make sure to pay off your bills on time.

Yes, your 20s are meant to be fun, exciting, experimenting, living carefree, and even making some mistakes. Mistakes are the best way to learn.

However, big mistakes, when carried out over the course of the decade, can end up haunting you for the rest of your life. Therefore, it’s important to not get swayed by access to easy debt and the social media life of others. Balance your present wants and your future needs and avoid the bigger traps.

(The author is CSO, )

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)