5 Common Money Mistakes We Make in Our 20s
Once we hit our 20s, we are fairly independent and ready to start chasing our dreams. Most of us make plenty of mistakes in this period – career mistakes, money mistakes, and relationship mistakes. It’s a period to learn and unlearn. Career and relationship mistakes may be inevitable, but with a little research and smart decision-making, you can avoid the money mistakes.
Here’s a list of 5 common money mistakes we all make in our 20s and ways to avoid them:
- Not saving for retirement
Since you are young, it might be hard for you to contemplate the prospect of retirement. But it is inevitable, so it will only be to your advantage if you start planning for your retirement today. Even if you start saving only a small amount each month, you will be able to have a decent corpus by the time you retire. The longer you put it off, the lower your corpus will be. So if you haven’t set your goals yet, start at once! There’s no need to make a lump sum investment; you can set up an SIP in Mutual Funds or PPF to kick-start your investments.
- Not showing restraint while shopping
In our 20s, we want to get the latest gadget as soon as it’s out. Plastic money has made impulse shopping easy. We all want to make big purchases like a new laptop or a smartphone or a new bike. We are willing to pay an EMI but not invest in an SIP. Instead of paying EMIs on gadgets, if we save enough to pay for the same upfront, we can save a huge amount. When you borrow money, you pay interest on it and this increases the cost of purchase. On the other hand, if you save up for something you can own the product immediately and also save on the interest that you would have to pay.
- Not having a balanced portfolio
In our 20s, we barely save enough to make small investments. Since most of us are not aware of various investment products, we make peer-based decisions. Our investment decisions should always be need-based. We must consider our financial condition and the amount of money we can invest. One serious mistake we make is to put all our money into one investment product. For instance, let’s assume you invest all your money in equity shares. When the market tumbles, the entire portfolio falls in value and you could end up panicking. If you diversify the portfolio, you increase the ability to earn higher returns and also reduce the associated risks. HDFC Bank Investment Products offer a wide range of investment schemes. The procedure to make a lump sum investment or setup a SIP is very simple and straightforward.
- Taking an education loan blindly
A lot of us tend to commit to an Education Loan without considering what our true professional aspirations are. Since most of us have our parents as guarantors, the loan gets approved in no time. We often ignore the fact that we will have to pay EMIs for the next five years and do not analyse if this course will help us with the same. Is the course worth it? One needs to consider the career prospects carefully before making a loan application.
- Not buying insurance
We do not think of insurance in our 20s because we have no dependents. Being young and healthy, we can’t imagine our life taking a cruel turn. However, if you have an Education Loan to repay, you must invest in an insurance policy that will cover an untimely death. Your employer might offer you an insurance cover but it is likely to be small and insufficient. Further, since you are only starting out you might switch jobs soon. It makes sense to go in for an insurance cover early in life so you can enjoy lower premiums and a longer tenure.
Consider the products available for investment and choose one that also offers tax benefits. Make investment decisions wisely so that you don’t have any youthful money mistakes to rue over. If you want to start investing after learning more about various investment options, HDFC Bank Investment Services is the right place to go.
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* The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances.