Financial PlanInvestment Philosphy

7 worst money mistakes to make in your 20s

Every one goes through a phase in life where he or she faces lot of changes and sees the world from different perspective. This phase is important from the personal, professional and financial point of view. In this phase we decide which course or college we have to join; which company and professional we have to select; decide on when and with whom we will marry. Yes, its our 20s when we decide all these and many other important parts of our life. We make some bad decisions as well, but few of them can be really dangerous specially from financial point of view. We have to take care of our money then only money will take care of us. We fight for the best job in the industry so we can get good salary still many a times we feel insecure about the finance. Why??

Lets figure out what are the 7 worst money mistakes one can make in his or her 20’s and how he or she can avoid them:

1.) No Financial Plan: Whenever I interact with the people of my age, I ask them do they have a financial plan in place. Do they know how much money they would need after 3, 5 or 10 years. These people are earning high salary and they have high goals; I am sure they enjoy their life at the fullest and they care very less about their financial plan. As they are living their life comfortably right now and they believe that this will continue. They keep majority of their focus on earning high salary and getting better job but are less focused on getting their finances in place. We all should do one thing i.e. getting a financial plan; so we can be aware about our finances and can keep track of our financial life.

2.) Overspending: Recently I was interacting with couple of my colleagues and one of them pointed out that every one should visit to good restaurants or pubs 2-3 times in a month and enjoy his or her life. Surely, he is enjoying his life and there is no harm in doing so but as I think he must be spending out Rs. 1500-2000 per person in an outing. In totality he probably is spending around Rs. 5000- Rs. 8000 on restaurants in a month. Since I am not his Financial Planner, I can not really comment whether he is overspending it or not but I can certainly say from my point of view that if he uses this money for wealth creation it could play as a boon in his tough times which is always unforeseen. Similarly there are lot of things on which people overspend and they believe that these expenses are must to enjoy life but they forget that life is not just about couple of years; it is a long journey where one has to face good and bad patches.

3.) No Emergency Fund: Frequently, people give excuses why they don’t put an emergency fund as they believe that their current job and lifestyle will continue to be the same and they will not face any emergency in life OR they believe that whenever emergency comes they will adjust. And in this belief they keep zero balance in this fund and keep spending their hard earned money. But I believe it should be the first thing you should do after meeting your basic needs. It is a good idea to keep at least 3 month’s salary in an emergency fund at all times for life’s little emergencies.

4.) No Retirement Planning: Most of the people believe that they dont need retirement fund. As its too far and they dont even want to think about it. They just want to live in present. It’s good to live in present but it’s a worse scenario if you ignore the future altogether as one day that future will become the present. Normally I suggest people to keep putting money even as small as Rs. 1,000-2,000 per month in their retirement fund. So, you can have good amount at the age of 60 by saving very small amount per month.

5.) Love for EMI: We Indian’s have a special love for EMI’s. Even bank and e-commerce companies realized it therefore they provide EMI facilities on different credit cards even at small amounts. We like to have Home EMI, Car EMI, Phone EMI and on different kind of products we buy from e-commerce. By this way we believe that we can have more unwanted physical products by paying very less amount every month. Surely in some way its good but in many ways it can be harmful.

6.) Not getting head start on Investing: When I see people of my age group I figure out very very less people investing. They keep their money either in bank or in LIC Policies and they believe it is the best which can happen with their money. Investing can be considered as the single most effective way to start building wealth. Warren Buffett is the man of our century who become rich by investing. As I believe you are working hard for earning high then why not put your money on work and get it multiplied.

7.) Living without Health Insurance: In India, family’s major expenses go to hospitals and medicines. We like to give our hard earned money to hospitals but we dont like to take a health insurance for just couple of 1000 Rs. Recently, I was interacting with a friend and he was so sure that he will not face hospital so he does not need a health insurance. When I told him that health insurance is not about current situation, its about future. When you are fit and young its better to get one health insurance so you can be covered under all illness. As certain treatments like cancer are covered after certain time period. Health Insurance surely can help you in saving a huge amount of money as such incidences happen all of a sudden.

The best thing about being in your 20s is that time is on your side. You can recover from money mistakes more easily and enjoy a bright future; for making good financial decisions starts with learning about money and being willing to take responsibility for your own financial success.

If you are in your 20s, what money mistakes are you trying to avoid? What would you add to the list (even if you’re not in your 20s)?

Vikas Agarwal
the authorVikas Agarwal
Vikas Agarwal is an IIT-Varanasi graduate in Chemical Engineering. He is the Founder and CEO of - an investment advisory website. He is a Business Development Professional but a Value Investor at heart. He writes articles on Finaacle, which focus on simplifying the art of investing and the causes of human misjudgment when it comes to investing. He also shares his experiences as an investor and lessons from some of the greatest investors of all time.


Join The Discussion

%d bloggers like this: