Three Financial Mistakes for Young Adults to Avoid

There are some great financial strategies that make a sound financial life achievable. There are also some mistakes that can slow down or stop a young adult from getting started on a good financial path.
1. Avoid bad debt. It’s easy to live beyond your means. Credit cards can be a convenience, but in the age of debit cards, there isn’t much need for credit cards. If you use credit cards, pay them off completely each month. Doing this builds your credit history in a positive way, so when you’re ready to borrow money at a reasonable level for a good reason – your first home, a reliable car – it’ll be easier. Also, don’t stress about student loans unless they’re at astronomical levels. Student loans can help get a better earning foundation. They’re cheaper than credit cards and for many people right out of college or trade school, the interest is tax deductible.
2. Don’t try to live your parents’ lifestyle. That doesn’t mean to avoid the Baby Boomer memories of shag carpet and Woodstock. What it does mean is that it took your parents lots of work and time to build up to their current lifestyle. Take a close look at what your current income will allow you to spend. Let that drive everything from how much you pay in rent (maybe a roommate makes sense), what kind of car you have (a solid used car will work until you make more and can buy a new car), and your social life (got to have that – look for fun ways to enjoy friends without running up credit cards).
3. Don’t be without a safety net. If you think, “My parents will help me out if I get in a bind.” Before you let that be your safety net, think how you feel about paying all your parents bills when they retire. They need to be saving for their future and you do, too. So with your income driving your current lifestyle, you’ll stay out of debt. When you decide what you’ll spend, save at least 10% of what you make. For the first year or so, put it in a basic savings or money market account. Once you have the cushion build up, you can start diversifying.
Avoid going the wrong direction as you start out. It saves you the trouble of cleaning up your finances later.

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