10 Money Mistakes that Hurt Young Adults

It’s easy to make financial mistakes when just starting out. Even after graduating high school, trade school or college there are still going to be a lot of things that must be learned, particularly in the area of personal finance.

Money mistakes that a person makes when they are young can be some of the most devastating, even if the financial value of the mistake is relatively small. We’re constantly being evaluated through the activity on our credit reports, so mistakes that are made early in life can have a negative effect for many years.

Also, not focusing on saving money at a younger age, and leveraging the impact of long-term compound growth, is a major hurdle for many younger folks. Here are ten mistakes that young adults should look to avoid.

1. Incurring Credit Card Balances. Some young adults can get themselves into serious financial problems by running up significant balances on their credit cards. While carrying too much credit card debt can hurt an individual of any age, it can be particularly damaging to a young person.

2. Only Paying the Minimum Amounts on Credit Cards. Even if an individual’s credit card debt is kept to “manageable” levels, one can still end up paying a lot in interest charges just to continue carrying that debt.

3. Making Late Payments. Making even a single late payment on any of your credit cards, (or a utility bill or any other financial obligation) can significantly reduce a credit score. Don’t make the mistake of making even a single late payment.

4. Not Saving. It’s essential for every young person to save, even if they think they don’t have enough money in their budget to do so. Building up an emergency fund to cover unexpected expenses should be a budget priority from your very first paycheck.

5. Not Investing. By the same token, when you begin an investment program can be as important as the investments you select. Maximize the time for your investment account to grow by starting investing as early as possible.

6. Not Starting an IRA. Similarly, the most effective way to be sure that you retire with enough is to start early. By setting up a tax-preferred IRA as soon as you start earning income, you’ll be able to maximize your retirement nest egg when you eventually reach retirement age.

7. Not Considering a Used Car. If you need a car to commute to your job, your first instinct may be to look at purchasing a new car, thinking that you’ll spend less on maintenance compared to a used car. But that’s not always true, and you can often save money (and avoid additional debt) by buying a quality used car.

8. Thinking You’ve “Finished” Your Education. Regardless of your career or profession, your field is going to change over time. Keeping yourself current on new developments in your area of expertise will help you maximize your earning potential.

9. Not Having Health Insurance. Having health insurance can help you avoid a devastating personal bankruptcy if you’re ever hit with significant medical expenses. If you don’t otherwise have access to affordable coverage, check to see if it’s possible to be added to your parents’ health insurance policy.

10. Not Starting a College Fund. College costs continue to rise faster than inflation, so start a college fund for your children, even if you don’t currently have kids. If you never have children, or they don’t go to college, then you can use that money for your own retirement.

Avoiding these ten mistakes can help you lead a more financially sound and fulfilling life for years to come.