5 Tips on Avoiding Money Traps in Your Twenties

5 Tips on Avoiding Money Traps in Your Twenties

When you’re in your twenties, you may have a tendency to make mistakes. Some of these should be reassuringly minor—you hack at your hair, color it purple, wear mismatched contact lenses. You take the wrong job, one you won’t love. You get scammed. And sometimes, you make mistakes about money too.
Here are a few money pitfalls and how you can avoid them while in your twenties.

Don’t Purchase a New Gadget

Being in your twenties is a stage when you’re usually influenced by your peers and you feel you have to adhere to certain fads, trends, and activities due to peer pressure. One such activity is buying the latest releases of mobile phones and handheld devices available in the market. If the current phone or device you’re using is already busted, then it may be time to buy a new one. If you already have a computer or tablet you use for surfing the net, and you just need a unit that can make calls, then it’ll be wiser to just get a phone that you can use to call friends and business contacts. Otherwise, try to be firm. Don’t get easily coerced by a friend or sales person to buy the latest release of a mobile phone or a gadget that have features you may not actually need. If your phone still works fine, then just put your money on other things, ones that you just might need more.

Live Within Your Means

Most people in their twenties make the common mistake of spending all their income, thinking they will receive more by the next pay day. A good budgeting tip though is to pretend you’re earning a couple of thousand less than what you actually earn. This will allow you to save a few thousands of your earnings each pay day, a portion you can actually invest in a fixed deposit account or a mutual fund that can earn you money over time.

Get Medical Insurance

You can also save money effectively by getting yourself a medical insurance. Without one, you’ll have no protection for when you suddenly get sick, and this can cost you a huge chunk of your hard-earned savings, especially if you get seriously ill and have hospital and doctor’s fees to pay. You wouldn’t want your hard-earned money to just go to the doctors, hospitals and drug stores now, would you? So better get health insurance coverage while you’re still healthy. A medical insurance can lessen the financial burden of hospital bills by covering a part of your expenses. Look for one that doesn’t include co-payments so you won’t be charged big for your hospital bills, should the time come that you get sick and need to be hospitalized.

Handle Your Credit Card Wisely

Being in your twenties makes you more prone to impulse buys with your first paycheck. Either that or you see others parading around in branded bags and shoes and clothes and you want some of that for yourself. Don’t mind these. Learn to avoid these money wasters. Handle your credit card wisely so won’t fall into a dark pit of debts. Only use your credit card if you are absolutely sure you can pay the amount back and that you actually can afford what you’re buying. If not, then please: don’t even consider it. Going into debt over a bag or a pair of shoes isn’t and shouldn't be worth it. Another money saving tip is to pay more than the minimum amount you’re required to pay for your monthly credit card charges. The sooner you complete paying for a purchase, the lower your chances are of having to pay for credit card interest charges such as late payment fees, below minimum fees, and so on.

Establish an Emergency Fund

It’s not enough you own a credit card that can secure payments for you at any time you find yourself short on cash and funds. Another tip in saving money is to establish an emergency fund that can help you pay for unexpected costs such as sudden hospital bills, unplanned house repairs, surprise family events—so much a surprise you didn’t even have time to put it in your budget—or even for your credit card bills so you won’t get charged with incurring credit card interest charges. Ideally, your emergency fund should contain three to six months’ worth of your income so it can be sufficient to cover you for any future emergencies, which could also include suddenly losing your job. Set aside this emergency fund, and try not to withdraw from it to ensure you have funds to use in the future.

By following these tips on avoiding money traps, you allow yourself to have less debts, which could increase your credit score and prove beneficial for you in the future. Being financially wise in your day-to-day living also enables you to achieve financial freedom at an earlier age, allowing you to purchase your dream car or dream house that much earlier.

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