If you’re under 30, this is the most important part of your financial life. Make the right choices now, and you could be on your way to early retirement and complete financial independence. Make the wrong ones, however, and your mistakes could ruin you for decades and severely decrease the opportunities you have access to. The good news for many is that you may be starting with a clean slate. And, if you made some mistakes, it’s still not too late to correct them. Here are some common mistakes people make when they’re under the age of 30.
Misusing Credit
This one has to be on top of the list of the most common financial mistakes people make when they’re young. This is where you’re beginning to build your credit history and is extremely crucial.
Some will advocate that you refrain from getting a card altogether, but that may not be the best idea. While you won’t have the opportunity to make errors that will put a blemish on your credit report, you won’t be able to establish one either. This can be just as much of a problem as having bad credit.
Instead, we would suggest that you go with either a card with a very low limit or a secured one. A secured credit card would be the best option. These will ask that you leave collateral in the form of a cash deposit, which will be the limit of your card. Knowing that your card is backed by your money will prevent you from going overboard while stimulating financial activity. Once you do, you can think of signing up for additional accounts and using them responsibly. This is how you start building the groundwork for solid credit.
Making too many Applications for Credit
At the other end of the spectrum, you have those who start chasing and applying for every single credit card offer that’s being sent to them. This is a sure-fire recipe for disaster, especially if you’re constantly getting rejected. It is important at this time that you keep a close eye on the number of inquiries that are conducted on your credit reports and keep them to a minimum.
If you are in desperate need of financing, we suggest that you go with services that won’t require any hard inquiry, like New Horizons, for instance. This provider can help connect you to a wide network of lenders who will only soft search your credit score, as well as relying on factors beyond your credit score to decide whether or not you’re eligible to get the loan. Working with a service like this will allow you to preserve your credit by reducing the number of inquiries on your report, and they offer flexible payment terms to help alleviate your debt burden.
No Registering on the Electoral Register
People under 30 are also less likely to register to vote and get involved in political activities. While you are entitled to your opinion on politics, not being on the electoral roll is affecting your credit score. That’s because various providers will use the information on the electoral register to validate yours. So, make sure that you’re signed up even if you have no intention of voting.
Not Automating their Finances
We often have way too much confidence in our ability to remember and keep track of things when we’re young, but this is exactly the time when you should start automating payments and deposits. Start using your savings account like it was supposed to and deposit a certain percentage of your paycheck every two weeks. Make sure that all of your payments are automated, and that you pay extra for those that only cover the limit, like with credit cards, for instance. Having an automated system now will ensure that you don’t commit a silly mistake that could put a blemish on your credit report.
Not Having a Budget
Young people often overspend without even realizing it. Yet, so many of them seem to see budgeting as either a constraint or a waste of time. But the goal of budgeting isn’t simply to limit your expenses, but actually realise them.
Eating out at your favorite Thai spot three times a week might seem minor at first glance, but not when you start calculating how much you’re spending per month. You could then start seeing where this money could be better used. Budgeting can be used as a way to help reprioritise your finances and identify possible leaks. This will also allow you to come up with creative ways to save money and repurpose these savings later on.
These are just some of the common mistakes people tend to make earlier in their financial life. If you manage to avoid them now, you’ll have a chance at setting yourself up for a bright future.
