My 20s feels like such a long time ago but I clearly remember the financial missteps I made along the way. Here are some of the financial mistakes I want to share with you so that you can avoid them.
Don’t try to impress your friends with money
It’s healthy to have a circle of people you can depend on but you shouldn’t have to impress them by flashing your money. You should also be comfortable with who you are.
If you have a friend who looks down on you because you’re not wearing the latest fashions or drive the right car then that person is not your friend.
True friends don’t judge you based on material possessions. They like you for who you are on the inside. If you feel like you have to buy things to impress your friends, it might be time to find new friends.
Don’t choose a school based on its name
Unless you’re going to Harvard or Yale or any other Ivy League school, I strongly believe the name of your school has little impact on your success in life. I went to a private university even though the public school would have allowed me to live at home and pay way less tuition!
I was blinded by the private school’s name and the cache it carried. When I told people where I attended school and they responded with, “Oh wow, that’s a good school.” I craved that affirmation and it made me feel like I made the right choice.
At the end of the day though, the name of the school didn’t matter at all. I could have ended up where I am today had I gone to community college.
Don’t be blinded by a school’s name. A private school may feel prestigious but you’re not necessarily getting a better value. What you’re definitely receiving is a more expensive tuition bill.
Choose a school based on more concrete factors like its course offerings and its specializations. Also look at its success rates for placing students in full-time jobs after graduation. A school’s name doesn’t matter if it can’t help you find a job.
Don’t feel like you have to go to college
Along with the previous point, I feel that not everyone has to go to college. There are so many good jobs that don’t require a college education. (find Mike Rowe article). If your goal is to be an entrepreneur, it might be more worthwhile to shadow local business owners than to enroll in a 4-year college.
If you worry about missing out on the college experience, try attending a community college or audit classes at the local university.
I think college is the way to go if you’re going into a highly specialized field like maths and sciences. I guess anything’s possible but I don’t know of self-taught astrophysicists.
What I object to is people going to college, pay ridiculous tuition and end up with a degree in philosophy or underwater basket weaving. Think I’m being harsh? I speak from experience. I have a degree in communication studies and while I had great fun in school, I can’t remember much of what I learned.
To be fair, the need to go to college is largely shaped by the society we live in. If you want an office job, you’ll likely need a college degree. However, if you have any inkling that you may not need a college education, it doesn’t hurt to defer enrollment for a year. The extra year gives you time to clarify your goals and also gives you time to save up money should you decide to go to college.
Don’t buy something just because it’s on sale
I suspect many of us have done this. You go to Target for one specific item and come out with many others because they were on sale! Or you go to the mall out of boredom and end up with bags of items that were marked down for clearance.
The temptation to buy cheap stuff still exists but I fight it off by reminding myself of what I actually need. This is why I always make a list when I go to the grocery store. I march down the specific aisles and grab exactly what I need. I am in and out of the store in 30 minutes without having bought unplanned for food that would go to waste.
Also, I keep a running list in my phone that keeps track of the type of clothes I’m looking for to fill in my wardrobe. For example, right now I have blazer, black skinny pants, grey skinny pants, and brown riding boots on my list. When I go shopping and come across a cocktail dress that’s on sale, I’m not gonna buy it because it’s not on my list!
Don’t feel like you have to hang out with friends at bars and restaurants
When my friends and I want to get together, we often fall back on dinner and drinks. It’s tried and true and it’s easy. But you know what, I find that when I eat out with friends, I tend to spend more money. One friend decides to order appetizers for the table and another friends insists that everyone have drinks.
After the main meal and dessert, you can easily be staring at a hefty bill (which you’re going to pay your fair share because only cheapskates avoid paying their fair share.
Next time you hang out with friends, suggest a pot luck, a game night, or a picnic in the park. The important thing is that you’re with friends. It doesn’t matter as much where you hang out. If you do decide to eat out, however, there are steps you can take to reduce your costs.
I started investing in the stock market when I was 18. After 17 years, you’d think I would have amassed a good amount of money. The thing is, investing in stocks is no guarantee that you’ll make money. Recessions and market crashes aside, you have to be smart about what you buy.
At 18, I didn’t know much about stocks other than buying them meant you owned a part of the company. I bought companies I had heard of like General Electric and AOL (more like OMG). I would check my portfolio obsessively expecting the stock prices to rise.
This was back around 2000 when the stock market was stagnant and referred to as the lost decade. After a few years of the stocks not doing anything, I sold them at a loss.
I’ve since learned to use a more set it and forget it approach and buy mutual funds. Sure, there are those who can pick the right stocks at the right time and hit it big. I’m not one of those people.
Don’t use grad school as a way to delay entering the real world
Higher education in the U.S. costs money. If you have clear goals and know what you want to do with your degree, graduate schools can help you reach your dreams.
However, you shouldn’t go to grad school because you’re not sure what you want to do with your life. What a huge waste of money that would be! If you’re tired of your parents nagging you to get a job, don’t pacify them by going to grad school.
If you’re having trouble getting jobs because you lack the necessary degrees, going to grad school is justified. But going to grad school just to kill time until something better comes along is a TERRIBLE idea.
Don’t take out more student loans than you need
Should you decide to go to college and grad school, you may have to take out loans to cover your expenses. Just because you’re approved for a certain amount of student loans doesn’t mean you have to accept the loan in that entire amount. The less you borrow, the less you’re gonna have to have back!
Student loans are not free money. It’s one thing to borrow money so you can pay your tuition. But you should not borrow money to supplement your beer fund!
Don’t feel like you have to buy a house
A house is likely the most expensive purchase you’ll ever make in your life. Therefore, it’s not one to take lightly. Don’t let anyone tell you that you have to buy a house.
Buying a house is a big decision and it’s one that could influence other areas of your life. Buy too much house and you risk not being able to pay the mortgage. Buy too little house and you may have to sell and move a short time later.
Just because your friends are buying houses doesn’t mean you have to as well. Renting is perfectly fine in the short-term or even forever.
We’ve all experienced buyer’s remorse. But you know what, a house that costs over six figures is not a decision you want to regret so think carefully.
Don’t measure yourself against other people’s definition of success
When you see your friends making big bucks while you’re making minimum wage, it can be a hard pill to swallow. It’s tempting to abandon your plans and follow whatever paths your friends have adopted.
But, you must stay true to yourself or you’re going to look back 10 years from now and regret what might have been. Define your own goals and your own idea of what success looks like. Don’t be swayed by outward appearances of success.
Don’t be penny wise, pound foolish
Think you’re saving money by not performing maintenance on your car? Your decision will not seem so wise when your car breaks down in the middle of the freeway.
Do you drive all over town to find the cheapest gas station to save $.02/gallon? The amount of time and gas you wasted likely doesn’t just the savings.
Have you purchased $5 t-shirts because you just couldn’t resist the low price? You probably ended up throwing it away after 2 washes because it started falling apart. It’s tempting to buy things when they cost so little but they likely won’t last long.
What do you think, did you ever make any of these mistakes? Do you have additional advice for what someone in their 20s should avoid?