Are You Making These Money Mistakes? Part 1

Remember when you were a child and you thought that grown-ups knew everything? Now that we’ve traveled around the sun a few more times, it’s obvious that no one has all of the answers – especially when it comes to managing household finances. Throw in daily stressors, like juggling children, a career, and the never-ending bills; sounds like a recipe for disaster. Thankfully, help is here! This week’s post is the first in a series about the common mistakes people in each age group make with their money. Let’s dive into part one, shall we?

Teens

How old were you when you landed your first job? Chances are you were around 15 or 16 years old, and you were working while going to high school. The stakes may not be as high as they are later in life, but teens can still learn lifelong financial skills from their very first job.

The biggest mistakes made at this age are:

·         Not developing healthy financial habits, including saving.

o   Habits can form from a young age, so start saving immediately! Before long, you’ll have loads of extra cash and the foundation for your future; not to mention a down payment on your first car!

·         Not participating in a 401(k) plan, if offered.

o   When you are young, retirement seems like a fairytale, but the years go by quickly. If your employer offers a 401(k) plan, especially if they match a portion, definitely opt-in, otherwise you’re leaving money on the table.

·         Missing out on college grants and scholarships.

o   Before taking on student loans, do your homework. There are many grant and scholarship opportunities waiting for you! Never turn down FREE money! Even your credit union offers scholarship money!

·         Not paying attention to student loan terms.

o   If you need to take out student loans, pay close attention to what you are signing. You must be comfortable with the repayment plan. Pay extra attention to the interest rates, the amount owed, and how you will pay the loan back after you are no longer in school.

20’s

At this stage, many young adults are getting an apartment, and it’s the first time that they are responsible for their own bills. They may also be ready to plan a wedding or start a family. Be sure to have an open and frank conversation about your financial goals and spending habits so that you and your partner are on the same page.

The biggest mistakes someone can make at this age are:

·         Living beyond their means.

o   Everyone has a unique financial situation. While it is tempting to try and keep up appearances, it isn’t realistic. Take the time to develop a budget that includes an emergency savings fund, bills, and other necessities, and don’t forget the fun money!

·         Racking up credit card debt.

o   Credit cards are easy to get, and too often, come with a high interest rate – especially for this age range. Be cautious when using your credit cards. For more tips on responsible credit card use, you can read my Blog post, “Are You Making These Common Credit Card Mistakes?”

·         Failing to build credit.

o Don’t make the mistake of paying with cash for everything. You NEED to build good credit, and you can’t do that if you only use cash. The key here is responsible credit use. If you want to learn more about your credit report, you can read, "Change is Coming" or learn about how your credit score is calculated by reading my posts, “It’s Your Credit Score, Protect It!” or “What’s in a Credit Score?”

·         Blowing your budget.

o   Whether you’re planning a wedding, splurging on a new car, or moving to a new city, STICK TO YOUR BUDGET. Yes, I know I have already mentioned a budget in this section, but hear me out. Don’t get caught up trying to live up to those unrealistic Instagram-worthy posts. You don’t have to spend your annual salary on a wedding or pay $1,000 each month for your car payment. Set a *realistic* budget and stick to it. Your future is worth more than what you’ll spend on a day-long party.

30’s

As a thirty-something, you have been around the block. You’ve probably had your fair share of nights eating ramen to get through to the next payday. You’ve also learned how you can survive on less than you think you need. Hopefully, your financial situation is much more comfortable than it was in your twenties. What are some things to watch for in this decade?

·         Those darn Joneses

o   Truth or consequences. There will always be people with more stuff. They will have a larger house, a newer car, a home full of the latest and greatest gadgets. You don’t have to do what they do to prove that you are successful. If you are happy with your life, that is what matters most. A larger house is great, but remember the costs associated with it. You’ll pay more in taxes, upkeep, and improvements; plus, you’ll need more down to afford the loan in the first place. Remember – the Joneses only show you what they want you to see. There is more going on behind the scenes. They may have tons of debt and are struggling. Don’t be like the Joneses – learn to be like you.

·         Paying for the past

o   Everyone makes stupid mistakes in their twenties. It’s a rite of passage. Unfortunately, you may still be paying for those mistakes. If you are carrying high interest rates into your thirties, now is the time to look at how you can save money. Can you refinance your debt? Can you consolidate or transfer balances to a lower-rate card or loan? Do you have equity in your home that can help you ditch the debt? Those are all options to consider.

·         Family

o   Kids are expensive. There are no two ways about it. Don’t get sucked into the trap of going overboard to make your children happy. The hot new toy will be exciting for a minute, but teaching your children lifelong financial skills is a far better lesson. Lead by example.

·         Planning ahead

o   There is nothing worse than being caught off guard by an unexpected expense. Build your emergency fund, savings, and retirement. Consider meeting with a financial advisor to set you on a path to meet your long-term goals. It’s also a good time to discuss your insurance policies and estate planning.

What did you think of this post? I want to hear from you. Comment below or email me. Stay tuned next week as I cover the money mistakes you need to avoid in your 40’s, 50’s and 60’s.

Krista Kyte is a personal finance blogger and personal banker with over 18 years of experience in the financial industry. Krista is passionate about helping our members understand their financial situations. She writes tips that will help consumers reach and maintain financial security, and start living the life they’ve always wanted.