When it comes to your personal finances, the decisions you make in your 20’s and even into your 30’s, can potentially have an impact on your financial situation later on down the road.
It takes most of us some time to build up our finances and also to learn how to handle money effectively and efficiently. It is perfectly normal to use lines of credit, from credit cards to loans from sites like www.kingofkash.com, as long as you do so responsibly.
The main aim is to avoid some classic money mistakes and to try and be as thrifty as possible so that you might have more money later on in life.
Think about retirement
The last thing on your mind when you are setting out on a career path is retirement, but this is one of the classic financial mistakes that too many of us make.
The fundamental point to consider is that if you get into an early habit of putting even a small amount of money away each month towards your retirement, it will make a substantial difference to the pot of money you will have when you finally put your feet up decades later.
You can’t turn back the clock, so if you don’t start thinking about your retirement until you are in your 40’s for example, those lost years will mean that you will have to save much harder in the time you have left, so put a small amount of way each month as a matter of habit, and you will be grateful you did, many years later.
Be wary of credit cards
Credit cards can be very useful and if you use them responsibly and pay back the amount you borrow at the end of each month, then it can work as a good way of keeping track of your spending.
The problem comes, when you run up a balance and then start making minimum monthly payments against the balance. Before you know it, a good chunk of your paycheck might be going towards paying off credit card debt, very slowly.
Credit cards are expensive and the interest rate charge can amount to a significant amount of money you are paying out in addition to the original amount you borrowed.
Be wary of credit cards and if you can’t afford to repay the balance when the bill comes in, don’t use it.
In case of emergency
One reason why you might resort to using a credit card or taking out a short-term loan is when you get an unexpected repair bill that you have don’t have the money for, and you can’t wait until you next get paid to get it fixed.
This is why an emergency fund is such a good idea. You aim should be to try and put aside about $1000 into a savings account, which you can then use to cover any emergency expenses rather than take on some expensive borrowing.
If you do use some of the money, make sure you set a plan to put it back with repayments from your monthly income.
Not starting an emergency fund is one of those mistakes that could come back to bite you, so try to put aside a small amount each month and you will soon have a bit of a financial cushion when you need it.
A new set of challenges in your 30’s
By the time you get into your 30’s you might have a different set of financial challenges and priorities to contend with.
You might have set your career on a good path by the time you are a thirty-something and then there is buying your own home, marriage and having children. You may well feel a bit more comfortable about these challenges if you are earning more money than you were in your 20’s, but there is still no room for any complacency.
If you are still finding yourself dealing with a reasonable level of debt in the form of loans, credit cards and car finance, your priority should be to use your greater level of income to take charge of your debt and pay it off, even if it means budgeting aggressively for a while.
It can also be all too easy to buy more house than you need a bigger or better car than you really need. As difficult as it may be, if you show some restraint and learn from any mistakes you have made with your finances in the past, it should ensure you enjoy a more prosperous future.
Molly Peters works as a personal finance consultant. She writes personal finance articles in her spare time, these appearing on a selection of money focused as well as lifestyle blogs.