It’s incredibly easy to doom yourself, financially, early in life. It takes almost no effort at all, especially if you have relatively little to begin with. Financial planning, unfortunately, is something many people don’t even consider until they’re well into adulthood. By that time, you could already be saddled with all sorts of debt — student loans, a car loan, a mortgage, etc. — and maybe even have a family. But some financial follies can prove to be more damaging than others.
If you’re still a young adult, you can make life much easier for yourself by making strategic decisions regarding money. It might mean forgoing what you want for a while or even spending more money than you’d like on certain goods or services. The ultimate goal is to avoid digging yourself a hole so deep that it takes years to get out of.
For a lot of people, these undeniably adult decisions need to be made before adulthood is actually breached. In other words, you’re going to be making potentially life-altering decisions at a very young age, well before the full context of those decisions can be taken into consideration. Here are some of those decisions, as well as some ways you can avoid painting yourself into a corner when it comes to your finances.
1. Choosing a lousy discipline
Perhaps the first and biggest misstep young adults make is setting off down a path that can be unrewarding. That is, choosing a career path or field that is rife with dead-end jobs or in danger of being automated. You can end up spending years of your life and a lot of money on a degree or certification that turns out to be worth less than the initial investment. To avoid that scenario, give some serious thought to what you want to do and the viability of your chosen field before diving in.
Next: Make a wise decision regarding how and where you train for your career.
2. Choosing an expensive college
A college degree was, at one time, a relatively rare thing in the American workforce. These days, however, it’s much more common. Roughly 33% of the American workforce has at least a bachelor’s degree. But that doesn’t mean you need to go deep into debt to get one.
Although some exclusive (and usually private) universities can set you back by hundreds of thousands of dollars, you can typically earn the same degree for a fraction of the price. The point is shop around and carefully consider just how much school is going to cost you.
Next: You probably shouldn’t go for the luxury car.
3. Buying or financing an (expensive) car
In an effort to rush into adulthood, many young people make the ill-advised decision to buy or lease a new car they often can’t afford or don’t really need. Although getting a new car can provide a rush, they’re incredibly expensive. You’ll not only be paying for the car itself but for gas, insurance, and repairs. If you do need a vehicle, opt for a more frugal choice, and save yourself from the expense of a big-ticket item that can set you back for years.
Next: The same logic applies to some of your favorite toys.
4. Financing toys
You can finance just about anything these days. But that doesn’t mean you should. Financing sounds like a great concept, as you can get otherwise prohibitively expensive goods at a price you can afford. But this is another way in which you’ll end up spending way more in the long run.
If you feel the need to get a new TV, video game system, smartphone, etc., save up for a few months and get it. Otherwise you’ll spend a lot in interest that’s best used elsewhere. One more thing to consider: By the time you pay off your new toys, they might be significantly outdated.
Next: Those shiny, new appliances are tempting.
5. Financing appliances
We’re not done with financing, or borrowing, as you should really be thinking of it. Another common item we pay for via financing or installment plans are appliances, such as refrigerators, washers, and dryers. Although these might not be the most exciting purchases, a lot of young people want fancy new amenities to make their place look nicer. If you buy your own home (we’ll get to this later) or rent a place that lacks appliances, this can be an easy and quick way to spend a lot of money you don’t have.
If you must, dig around on Craigslist or at garage sales for appliances. You don’t need brand-new stainless steel amenities when you’re just striking out. Simply something to keep your clothes clean and your food from spoiling will work.
Next: Credit is complicated.
6. Failing to understand credit
We’ve been harping on financing, which is a fancy word for borrowing. Now, we’re applying that same logic to credit — credit cards, specifically. There is a lot of confusion among young people as to how credit cards work. Some think it’s magical free money. Others don’t understand the “interest” part of the equation.
This is another dangerous trap. Learn the basics of borrowing and interest, and don’t bury yourself in credit card debt before you’re old enough to buy a beer.
Next: Saving money is good. But is saving too much money bad?
7. Being overly frugal
We all know somebody who seems to have a different crappy car every month. They keep buying $1,500 junkers and then have to get a new one when they ultimately peter out. The same phenomenon applies to other products, too.
The underlying lesson is there are some purchases you don’t want to skimp on. If you need a quality good or service, buy a quality good or service. It’ll last longer, saving you money and giving you peace of mind.
Next: This also applies to one of the most important purchases you’ll ever make: housing.
8. Buying a house
People will tell you to buy a house. It’s a good investment, and you’ll start building equity rather than paying rent. It’s not always a bad idea. But if you’re young it might be better to hold off. Depending on where you live, housing costs can be insane.
Not only that, but there are other costs associated with it you might not be equipped to deal with: insurance, taxes, repairs, etc. You’ll also want to be somewhat flexible in your ability to relocate when you’re young, should opportunities present themselves. Buying a house isn’t always a bad idea, but think about the big picture if you’re fresh out of school.
Next: Think about the company you keep.
9. Dating the wrong people
Ever date a vampire? You know, someone who bleeds you dry, financially speaking? Depending on how long that relationship lasts and your tendency for self-inflicted damage, you could be killing your finances. If your significant other constantly expects gifts, pampering, vacations, etc., you might have found yourself in an unsustainable dynamic. Either talk it out or move on.
Next: Kids are expensive.
10. Starting a family too early
Because we’re on the topic of relationships, sometimes those relationships result in children. And that can happen whether you’re ready for it or not. Some people want to rush into parenthood and have children at a relatively young age. This is one of the few key decisions that can set you back significantly, as children are unbelievably expensive to raise.
Next: Your bills won’t disappear.
11. Ignoring your bank statements, credit report, and credit card bills
When you’re struggling financially, you can create a safe space for yourself by strategically ignoring anything related to money. We’ve all done it: refuse to check our account balances or remain blissfully unaware of how much credit card debt we’ve racked up. You’re not helping yourself. If you establish this as a habit early on, it’s going to be much more painful when you eventually have to deal with it. Stay on top of your finances, and keep track of what you have and what you owe.
Next: Don’t be afraid of change.
We mentioned this concept earlier: the idea that your inflexibility can hurt you. Specifically, we’re referring to the idea that you’re not open to things that can open up new doors, such as moving to a new city, taking on a new job or challenge, or even working for less money than you’d hoped. Remain spry and mobile, and you never know what might land in your lap.
Next: That brings us to our next point: Get an attitude adjustment.
13. You’ve got the wrong attitude
Early in your career, you might end up in a job or position you feel is beneath you. Even with a college degree, you’re working side-by-side with high school dropouts, instead of bossing them around like you imagined. Tough. Suck it up, and press ahead like everyone else.
It’s important to remember you’re not entitled to anything, and having a bad attitude will only set you back. Who do you think is more likely to get promoted: The guy or gal who complains all the time or the one who gets their work done, on time, with little bellyaching?
Next: Don’t skip yoga.
14. Falling out of shape
You’ve heard of the “freshman 15” or some variation of it. Likewise, you’re probably familiar with the term “dad bod.” They both get to the idea that people fall out of shape as they get older. And when you add school, work, and kids to the mix, it’s easy to see how it happens. But it can cost you in the long run. Stay in shape, and you’ll find yourself more active, energized, productive, and saving on health care costs. Never take your health for granted, even if you’re still young and have time on your side.
15. Not saving any money
This is so simple it almost feels like cheating to include it. Yet, it’s also the single underlying factor that can derail your finances for years to come, even into retirement. You need to save money. Even when you’re young and pulling in next to nothing, scrape together what you can and throw it in the bank. Eventually, you can start putting money into retirement accounts and then into other investments. The important thing to remember is to save early and often.