I made a lot of money mistakes in my twenties.
I was careless, inconsistent, and unwise. I didn’t live up to my financial obligations and it left me lagging behind in more ways than one.
You can read more about those careless financial mistakes here: This One Choice Gave Me Financially Control.
It has been a few years now and I’m happy to say that I’ve straightened up a bit. I’ve even replaced some of my old bad habits with good ones, which are ready to propel me to a better financial future.
Today, I’m going to share some of those vulnerable and downright embarrassing money mistakes with you. I hope it’ll inspire you to hone in on your own finances.
No matter how dim your situation might seem, you can make the necessary changes today for a better financial future tomorrow.
Let’s dive right in.
My 11 Big Money Mistakes to Avoid
1. I had no vision
Financial vision is crucial to financial success. Without vision, trying to guide your money is like driving around town without a specific destination. No wonder it felt like I was on directionless journey.
Not only that, but vision will give you the motivation to choose well when making your daily financial decisions. Without vision, there is no purpose, plan, or need for goals. Having no vision for my finances is one of the biggest money mistakes of my twenties.
2. I wasted money on depreciating assets
The fastest way to create wealth is by investing into appreciating assets. It’s also true that the fastest way to create debt (the opposite) is with spending your money on depreciating assets (examples: a brand new car, the latest gadgets and styles).
The difference between investment and consumption is that investment is putting money towards something that has the potential to bring profit, or a return.
Consumption is throwing money on assets that satisfy gratification but depreciate. These kinds of items can put you in great debt. I call them freedom robbers, or opportunity thieves.
Looking back in my early twenties, many of my purchases can only be classified as consumption. A big financial mistake. Are you makin’ it rain on noise and current trends, or are you investing for a better future?
3. I didn’t save
Saving is crucial to personal finance. It positions you for greater opportunities and protects you from setbacks when financial storms come. As a young man, I didn’t make a habit of saving. It was another common millennial money mistake I fell into.
4. I didn’t pursue knowledge or have a mentor
Knowledge is power. We’ve all heard that. Sadly, I didn’t take this wisdom to heart and run with it. In fact, I ignored it as a young buck and now I find myself playing catch-up.
Finding a mentor to teach you financial management can help you avoid major financial mistakes. If you can’t find one, harness the power of the internet. There are plenty of quality resources to educate you on the ins and outs of personal finance. These materials can make you a savvier consumer and a more excellent manager of your finances.
5. I didn’t work to improve my credit
The need for good credit has increased even more in recent years. It can affect your career options, potential utility lines, your options to invest in real estate, and so on. Having good credit is part of good financial management.
I borrowed plenty of times (see money mistake #9). I just didn’t stick to the rules of paying it back, which hurt my credit greatly and stifled my buying power and ability to invest.
6. I neglected to use a budget
I had a poor understanding of what a budget is and what it can do for my finances, so I neglected it.
In my limited understanding, I thought a budget would be my boss, but it turns out it’s the other way around — my budget works for me and with me.
NOT only does budgeting help accomplish your goals, it gives you control. I had neither. Not using a budget is one of the easiest money mistakes to avoid. I didn’t.
7. I didn’t take planning for retirement seriously
We’re all going to retire someday, whether by choice or our physical strength can no longer hold up. Experts will tell you that the earlier you start setting money aside for retirement, the better off you’ll be. This is mainly because time generally works for you instead of against you. Compound interest, anyone?!
The problem is that I didn’t understand this concept. As a result, I didn’t start funding my retirement account until I was almost 30.
8. I didn’t take advantage of tax benefits
Tax benefits are a big deal to the wealthy. “The mega-rich are adept at keeping their taxable income and applicable tax rates as low as possible.” –Moneytips.com
So, why is it that many middle class people don’t take advantage of tax benefits that are rightfully theirs? Maybe I’m the only one. Not taking advantage of my tax benefits is one money mistake I could’ve avoided.
9. I handled debt poorly
Whether it’s through a credit card or a car loan, borrowing money has been fairly easy (well, it was before I jacked up my credit). The hard part is paying it back. (See money mistake number #5.)
I’ve not always handled my debt properly. Frequently, I would make late payments, and on two separate accounts, I had gone almost a quarter of a year without making a single payment.
Not repaying what you owe can put you in a bad spot with lenders. And that’s only one of the MANY ways poor debt management can hurt you.
10. I overlooked the importance of risk management
Risk management is really important. The most obvious benefit is that it protects your assets. Having no risk mitigation or not an adequate amount can put you in the hole quickly (examples: car insurance, health insurance, having multiple streams of income).
Imagine having thirty years of asset accumulation and it vanishing overnight. Pretty devastating, right? I’m lucky nothing major like that happened in my life when I was being careless.
Don’t make the financial mistake of overlooking the importance of financial protection. It can save you an untold amount of grief when Murphy comes calling (Murphy’s law).
11. I didn’t have accountability
Accountability is one of the most overlooked financial strategies, in my opinion. And it’s totally FREE. You don’t even need a financial expert. All you need is a trusted friend who has your best interest in mind. Tell them how they can hold you accountable to your goals.
So, why do we not take advantage of this strategy? Study after study shows us that it’s still taboo to talk about our finances. (I’m obviously done with that.) Having no accountability partner was one of the biggest financial mistakes of my early years.
What can you learn from this millennial’s money mistakes?
There you have it. All of my financial shortcomings from my twenties in all it’s
glory disgrace, for you to do with as you see fit.
But here is the take away…
I haven’t always been financially responsible. Most of my financial struggles have been self-inflicted. They were more of a character issue than a money problem. My financial decisions have revealed this time and time again, yet I was too immature to see it and change early on.
Looking back, it’s embarrassing to see who I was. However, eventually I changed.
The point is… if I can turn my finances around, so can you.
We all struggle at times. Yes, even the best of us make poor financial decisions that can leave us scratching our heads. Or worse, regretting. But it’s not because of carelessness. It’s because we’re humans.
And as humans, we are going to make those financial mistakes, even on our best day, with a clear objective. Don’t let your failures derail you from pursuing your goals! Consider it as part of the process; learn from your mistakes and move on.
To expect to not have shortcomings along your financial journey is to deny being human. However, staying discouraged, disappointed, and stuck is a different story.
Bounce back and make the next decision the best decision to get you out of your situation. The way out is one good decision at a time.
Let my money mistakes inspire you to get serious with your finances and find hope on your journey.
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- Bad Credit: What Is It? How Does It Affect You? How Do You Rebuild Your Credit History? - July 17, 2017
- Why Multiple Streams of Income is No Longer a Luxury (and How to Position Yourself for Income Diversification) - July 3, 2017
- 11 Money Mistakes That You Can Avoid to Better Manage Your Money - June 19, 2017