In terms of money, your 20’s are a pivotal point where you can either get a head start, or fall behind. It’s usually the decade where you get your ‘first job,’ learn how manage your own money, and begin to save. While there are plenty of ways to get a head start and set yourself up for financial success, there are also plenty of mistakes you could be making that could cause you to fall behind.
Here are the Top 4 mistakes to avoid in your 20’s according to Yahoo Finance.
1-Investing in your 401k, then forgetting about it
Instead of enrolling and forgetting about your 401k, you should evaluate it on a half-yearly basis. By reallocating your assets, you reduce the risk of getting off track. It is also a great opportunity to invest and grow what you’ve already saved.
2-Assuming low-cost healthcare in retirement
Healthcare expenses seem like a distant thought when you’re young and healthy. But, on average, healthcare expenses after retirement can easily go above 100k. Start thinking about it now and set up a medical savings program.
3- Cashing out too early -stocks, bonds, and savings plans
Although cashing out early sounds appealing, you aren’t doing yourself any favors. When you cash out, you pay a 10% penalty on top of taxes, robbing yourself of thousands of potential dollars in retirement funds.
4-Don’t wait to save
You should start saving as early as possible because the most important advantage is time. Also, when you are in your 20’s you can take advantage of ‘compound interest’ which allows your savings to grow more and more over time. For example, saving 2k in your 20’s is worth more than saving 10k in your 50’s.