Every young person yearns for financial freedom, independence and stability. Being youthful has its perks, but this comes with many pitfalls if one engages in financial habits that have a negative effect on their pockets.
According to Investopedia, one of the world’s leading financial sites, flaws on personal finance are mostly exhibited by the youth in their twenties and this has a ripple effect on their old age.
Kenyans.co.ke has compile six common financial mistakes you should avoid in your twenties if you are to build a solid financial foundation.
Over Reliance on Credit
There is a good debt and a bad debt. Good debt refers to debt used to acquire assets that offer sustainable returns. Bad debt refers to the debt used on non-essential goods and services.
Youths who do not have any consumer debt are always considered to be on a good financial track. If you are in any debt, whatsoever, you must work to clear yourself from that financial burden.
A recent report indicated that 19 million Kenyans have active mobile loan accounts, majority of this population being the youth. Being able to avoid such debts put you on the right financial trajectory.
Unbudgeted Spending
Young people, in their twenties, may feel financially secure if they have no debts. This creates a temptation to overspend, especially where one has not embraced a saving culture.
There is a distinction between overspending and not spending at all. Financial discipline is imperative when balancing enjoying your youth and securing your future.
Peer pressure will greatly influence your spending habit either through the fear of missing out (FOMO) or trying to maintain a certain perspective or perception your friends have of you. The easiest way to run out of money is by showing off how much money you have.
Lack of Financial Plans
When young people lack financial plans, it is easily assumed that it is due to arrogance or ignorance. One should find time to educate themself on financial discipline and investing options.
Being aware of financial opportunities and how to navigate the financial institutions so when the appropriate time presents itself, one can make a decisive financial move that will build their portfolio, is a key to stability.
Putting Off Saving
Young people will argue that they might regret not living life to the fullest. They rationalize the options of forfeiting a saving culture while expecting it will be easier to save in the future when they have a steady income or if they are richer.
Everyone has a limited judgment on the future, it is wise to anticipate the worst possible outcome by saving the little one has.
Setting your Priorities
As a young person, there are life necessities and infinite wants. It is important to prioritize the necessities always before getting to the wants.
Some of the necessities will include paying off utility bills before setting aside money for activities that are merely wants.
Ignoring Insurance
No one is born with a precognition ability. Young people are more inclined to believe they are invisible, they are likely to believe they are immune to injuries, illnesses, disasters, and other problems.
It is always wise to explore information and make an informed decision to ensure your health and retirement are planned for. Young people should consider investing the little they can on retirement accounts. There are national and private retirement plans one can invest in to secure a comfortable old age.
