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You’ve just entered your twenties and it is a time in which you are figuring out your life. What are your life goals? What career do you want? At the same time, your twenties are when you’ll make mistakes and hopefully learn from them. For many, this is also the first time in their lives where they are faced with handling their own finances. Learning to be financially responsible is important for everyone as the choices you make with your money, good and bad, can follow you for the rest of your life. Paying off or taking out loans, paying bills, spending habits and the debt you build up can all follow you into and beyond your thirties. Living within the constraints of a budget can be limiting and not at all fun, but it is better than living under a mountain of debt when you are in your thirties or older. With that in mind, here are some personal finance mistakes you should avoid to set yourself up for financial security.

Pitfall #1: Spending more than you make.

The first pitfall to avoid on the road to financial stability is spending more than you make. One of the easiest rules to accumulating wealth is to live within your means. When you’re just starting out in your career, this rule can be a killjoy. So often it seems that you’re having to go without while your friends and colleagues are all living the good life. Depriving yourself is never fun, but continuing to live within your means and obtaining financial freedom is far more gratifying than trying to keep with everyone in your social circle.

Pitfall #2: Living off of credit cards

Pitfall number two to avoid is living off of credit cards. Have you ever wanted something really bad, but haven’t been able to afford it? With credit cards, there’s a piece of plastic in your wallet that says you can have that item you really want right now. After all, with a credit card, you can pay for it later. Well now, later has arrived and you still can’t afford to pay for all of the things you have purchased on your credit card. This habit is a foolproof way to accumulate lots of debt in a short span of time. Even worse, this debt can take years to pay off in full. Financial wizards agree that it’s not a good idea to use credit cards to get by and advise making purchases in cash as often as possible.

Pitfall #3: Not having an emergency fund

Pitfall number three: not having an emergency fund. Your day is going great when out of nowhere, life attacks and suddenly, you’re stuck with a costly expense such as an expensive car repair bill. How are you going to be able to afford to pay it? If you had an emergency fund, you might have been able to. An emergency fund is an important safety net to have to protect yourself from crippling debt when life attacks. It’s advised by financial experts that you have at least three month’s salary or more saved for emergencies. Make room for the fund in your budget each month until it’s topped off.

Pitfall #4: Borrowing money for a car

The fourth pitfall to take notice of is borrowing money for a car. If you’re in your twenties, then you don’t really need a fancy ride. At all. What you actually need is a car that is reliable and gets great gas mileage. If you can’t get a car right away, look for transportation alternatives. Consider public transportation if you live in an urban area and ride share options if you’re in a rural area.

Pitfall #5: Putting off saving for retirement

Pitfall number five! Putting off saving for retirement. Here’s the truth about saving for retirement: the sooner that you start putting money into a 401k or other retirement account, the longer that money is going to have to accumulate interest. This means that when you are ready to retire, your retirement account is healthy and able to support you in your old age. The general advice is to invest ten to fifteen percent of your earnings in retirement. This is important after all, you’re making an investment in your future.

Pitfall #6:  Forgoing insurance

The sixth pitfall to be cautioned off is forgoing insurance. It doesn’t matter what you think or what your friends tell you. You are not invincible. This is a lesson best learned now rather than when you have to pay for an ambulance ride to a hospital and go into debt. Or how about when another driver sues you for the accident? Or when you’re struggling to replace your personal items after your place gets robbed? Do yourself a big favor and get insurance. Shop around for competitive rates and work it into your budget.

Pitfall #7: Not monitoring your credit score

Letting your credit score decline is the seventh pitfall to be wary of. Your credit score is based on your history. If you do things to build a bad record in your twenties such as missing payments, it is very likely to haunt you for decades to come. It is possible to repair the damage you created in your twenties, but it takes time. It truly is best to start out with good credit in the first place.

Pitfall #8: Going into debt for your wedding

The eighth pitfall in the road is going into debt for a wedding. Your wedding is a big day, but it is only one day. Come up with a budget for the event and consider your options carefully before you take the plunge and end up with long-term debt hanging over you.

Pitfall #9: Not discussing finances with your significant other

The ninth pitfall goes with the eighth: not discussing finances with your significant other. This can be an uneasy conversation to have, but it is important. Talk about how you invest and save money, and how you handle large purchases. Be honest about your views on money and work together to come up with viable financial goals.

Pitfall #10: Having your financial security linked to your family and friends’ money

Finally, the tenth pitfalls to avoid on the road to financial security is going to friends and family for money. Friendships can potentially end when money becomes involved. This is especially likely if you borrow from a friend and then can’t pay him or her back. Save your friendships and family relations by going to the bank for a loan if you need extra money.   

Post Author: Ascend

Ascend is a group of guest writers and industry experts who are passionate about personal finance and about helping people get and stay out of debt.

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