Check out the common financial mistakes to avoid in your 20s

1. Making Large, Unnecessary Purchases

Making large purchases can be exciting, especially for young adults just starting to enjoy financial independence.

However, if you constantly overcharge your credit card to purchase unnecessary big ticket items, you’ll be setting yourself up for excessive debt and high interest payments.

Before buying anything that costs a couple hundred dollars or more, assess whether you need it, whether you can afford it, and whether there are cheaper alternatives.

If you want to buy a specific luxury item, a smart plan is to save up for it over time.

1. Not Having An Emergency Fund

You never know when you’ll encounter a rough patch due to an emergency, such as job loss or medical expenses.

Without an emergency fund, these unfortunate events can dig deep into your pockets, disrupting your money allocation and possibly leading to financial instability.

There’s no strict rule on how much you should save for emergencies, but I always recommend having enough funds to cover at least three to six months of your expenses.

1. Not Saving For Retirement

In your 20s and 30s, retirement feels so far away that you’re likely not considering saving for it yet. However, saving for this phase of life early on is crucial if you want your retirement planning to be manageable, cost-effective, and stress-free.

By starting to save while young, you harness the power of compound interest and make it a habit to set aside money in your nest egg. Moreover, you’ll increase your chances of retiring young, as retirement is more reliant on how much you have saved than on your age.