If you find yourself in your twenties now, it may seem like an insurmountable task to both pay your bills and save money at the same time. But what you do before you’re 30 can have a significant impact on your finances down the line. So in the first in a series we look at the biggest financial pitfalls for you to avoid in your twenties.
We may be the first generation in a long time in Ireland that is not going to be as well off as the generation before us, but if you're like me, you probably got out of secondary school at the height of the recession and are therefore used to not having money.
This means we are better than most at living hand-to-mouth and thriving regardless.
However it’s difficult to ignore the way things are going: houses are becoming smaller and more expensive. And things once taken for granted in your twenties like owning your own home, or even a car, have almost become pipedreams without a major windfall of cash.
And you shouldn’t have to hope for the death of a rich relative to hope for some financial stability!
However there are still things you can do to manage your money better and set you up for furture success.
So with that in mind, here's a list of seven common financial mistakes to avoid in your twenties.
1. Not setting clear financial goals
The first thing you should do is figure out what you want.
Are you saving up for a house, a car, to emigrate? The choice is yours but knowing what you want is paramount.
It's also really important that you make clear, realistic goals, and try not to lie to yourself, as we all think we are different people than we are. So if you go out out three times a week, you are going to have to budget for that and not say you only go out three times a month.
With clear goals in mind it'll be easier to figure out where you stand and will make it a bit easier to save for the future.
2. Not setting up a savings account
This can seem like a no brainer, but setting up a savings account is the first step to having savings.
Even if you don’t feel like there's anything left over at the end of the month, setting up a savings account at least gives you somewhere to put some spare cash. Even if it's just a tenner here or there, it's something.
Add to this a 'notice' period on the account and you'll start to build up your nest egg quicker.
Say for instance you choose a savings account that requires one month's notice. This means you'll have to give 30 days' notice before you can withdraw any cash. This should be a good safeguard for those of you who make impulsive purchases, as after the 30 days are up, it's likely you won’t still want whatever it was you thought you needed!
3. Ignoring your options for retirement
Chances are if you're in your twenties you’re probably not thinking too much about retirement, and the days of slippers and a pipe will seem like a far fetched day dream. And with low salaries, high rent, and a rising retirement age, it’s hard to imagine ever getting a chance to retire.
But everyone needs to start a pension at some stage and the earlier you start, the easier it will be. With this in mind, it’s more important than ever to know what your options are from an early stage.
Many workplaces will offer access to a pension scheme, which your employer will often contribute towards, and which the Government will effectively contribute to in the form of tax relief.
So if you're thinking of saving for your retirement, look into a pension scheme rather than a normal savings account. By failing to do this you are effectively leaving money on the table that will come in useful down the line.
So if you're in a job that has a company pension scheme, maybe it’s worth thinking about starting a pension sooner rather than later.
4. The credit card trap
When you go to college banks can start throwing credit cards and loans at you, and looking at your friends in Thailand on Instagram, it can be hard to say no.
However this can be a trap that many fall into.
It's far too easy to spend on a credit card, but not so easy paying it all back.
Interest rates on student credit cards can be as high as 35%, so while that trip to Thailand might end up being some of the most amazing weeks of your life, you could spend months or even years paying for it if you're not careful.
5. Getting into debt too early
We all need to borrow from time to time but getting into debt in your early twenties can lead to financial hamstringing for years, which could scupper your longer-term plans.
Whether it’s to go on a holiday, go see your favourite band, or to just get over Christmas, try avoid getting into large debt while you're still so young, as you you'll need to borrow anyway when you're older to buy a home, start a business, or just to buy a decent car for work. And you'll be glad if you're starting from a clean slate.
6. Not tracking your money
Tracking your money gives you better awareness of your spending habits and what you’re actually doing with all your cash.
You may think you’re being thrifty but when you monitor your spending you could soon realise that your daily morning coffee, sneaky after-work pints, and midweek lunches all add up.
So make a budget and a note of how you actually spend your money so you can see where it's all going and what you can really afford.
7. Overspending on your household expenses
This is something we're super conscious of here at bonkers.ie.
Making sure you don’t overpay for your current account, TV, broadband and other household bills has been our mission since we started in 2010.
So if you're struggling to get by, don't make it harder for yourself by overpaying on your bills.
Get in touch
Are you in your twenties and struggling to get by? Have you any other tips for managing your money?
Get in touch with us and let us know. Comment below, tweet us @bonkers_ie or message us on YouTube, Facebook or Instagram.