• Friday, December 01, 2023
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Financial mistakes of young people


 Some people start earning their first regular paychecks in their early 20s whereas their financial education is still that of a teenager. Our education system hardly even talk about basic personal financial principles, so it is not surprising that people make a lot of mistakes in their 20s. These mistakes later come back to trouble us as regrets when we are older. However, you can avoid making these mistakes by reading the following points.

Buying Liabilities rather than Assets: For most people in their 20s, the world is filled with attractive and shiny objects that they have wanted to purchase ever since they were teenagers. The newest Apple gadget, the newest car, or just the biggest plasma TV or LCD, all these objects attract us when we have money for the first time in our 20s. However, these objects, as good as they are, are just dead ends when it comes to growing your assets over time. Financially, they are what we should call liabilities. Your latest phone will cost you money on its plan every month “BIS’’, the TV too will cost you money regularly, and the latest car will require maintenance and storage. Unless these objects change your life significantly, you should buy as few liabilities or objects as possible.

One way to think about each purchase is to calculate how many hours you have worked for it. If there is a N100, 000 computer system you want to buy to play games, and you are earning N30, 000 per month, then it means you need to work 3 months plus to earn that much money. Are you willing to spend 3 months plus of your life working just so that you can buy the latest computer to play game?

Not Saving for Retirement as early as Possible:

When one is 21, the idea of retirement seems to come from another planet. However, a 21 year old man or woman will one day be 60, when he or she will use the money saved as a 21 year old to get by the daily financial requirements. Many people in their 20s do not start saving for their retirement till they are in their late 20s or even 30s. You should avoid this mistake – save for retirement as soon as possible.

Falling in the trap of student loan debt:

Student loans are a necessity if you do not have the financial means to pay for your school. However, oftentimes people think that student loans are free money, and start using it to pay for goods and services they are not meant for. It is not uncommon to see people using their student loans to pay for their rent as well as groceries. However, this is not advisable. Student loan is money that you have to pay back someday, and with interest. You should use student loans in moderation.

Not discussing Money with your partner: Most people are married by their late 20s, and usually they marry someone they love. To talk about money with your spouse seems tactless to many, which is why they never talk about money with their partner. Normally, each partner manages his or her finances, without talking about what they are doing with their finances. Whether they need to keep their finances separate, or combine them to some extent, is a decision that requires open communication. If you are married, you need to start talking about money with your spouse.