5 Common Financial Mistakes Young Adults Make

The below is from an extraordinary blogger named Ryan who pens about the trials and tribulations that face young adults at http://www.lifefreshout.com. LifeFreshOut is a site dedicated to discussing life as a young person in the ‘real world’ ranging from personal finance, careers, housings, and anything else relevant to 20-somethings.

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Young adults are notorious for making bad decisions in life. I’ve made plenty myself and I’m only a few years in. Here are five common ones I’ve seen myself and others make.

Underestimating the total cost of big-ticket items.
When I moved away from home to start my career, I had the car my parents and I shared while I was still at home. After a few months of working, I decided I wanted a change. I wanted to buy my own car. So after months of research, I went to a dealership and bought a brand new car. Now I had done quite a bit of calculations and decided that while a new car might not be the best financial decision, I could afford it. Here’s where I ran into a little trouble. All of my calculations were based on assumptions and not on reality. So when I got my first flat tire ever, I hadn’t planned on the uncommon tire size of the new car costing more to replace. Or that I would want to replace all four tires after my second tire problem a month later. Also, my previous car was a gas sipper and while the new one is still pretty economical, it’s not as efficient as I predicted. I underestimated the cost.

Not taking care of your health
It’s easy to just assume that your health is going to remain as strong as it was in your teens. As we get older, inevitably we are going to develop some problems. And these problems will end up costing us in money both in doctor visits and medication. At one point, I was feeling a little ill, but ignored it figuring it was nothing. Eventually it worried me enough that I went to the hospital. As I describe in a previous post , that ended up costing me big. A quick trip to the doctor earlier would have saved me a boatload.

Not paying enough/paying too much when buying small items
Many of us who read blogs like WLGYL are pretty conscious of our spending habits. We try to save where we can, but we also think that some things are ‘worth’ spending money on. Unfortunately, many times we get this wrong. I love to cook, so the kitchen is one area where I fall victim to this constantly. When I moved into my first apartment, I bought a large set of cooking utensils that came out to roughly $1 a piece. Thinking I was being frugal, I was pretty proud of myself. Obviously, these were pretty cheap, and many of the items bent and broke within a few months. I had to replace these and of course felt pretty dumb for wasting money. On the other side, I thought I would splurge and get a nice grill pan. I had never owned one before, so I burned a lot of food onto it within the first few weeks. Eventually it was ruined and I had to toss it.

It comes down to learning what items we should spend a little more money on, and what items we should get cheaper versions of to practice on first before upgrading to higher quality. Easier said than done.

Thinking things will last longer than they do
This one encompasses the previous three, but I think it’s worth its own special acknowledgment. I’ve been pretty proud of the fact that I drastically cut back on my spending on clothes once I started getting serious about budgeting. So much so that I don’t really even think about buying any new clothes most of the time. The truth of the matter is that I wear the same couple of pairs of jeans every week. Because of that…they are starting to get a little tattered and frayed, a few spots of spilled juice haven’t really washed out, and my style has matured a little making some of them less appropriate for me to keep wearing to work. Now that I realize I need some new clothes (with a little help from jokes from my friends), I also realize that I did not budget for replacing my wardrobe or really most things I own. I just kind of assumed they would last indefinitely once the initial purchase was made. Not realistic.

Paying avoidable fees
I picked up my first speeding ticket recently. It was completely avoidable, and was solely because I was annoyed at some traffic I had run into a few minutes earlier. That ticket cost me over $200 and could potentially increase my insurance premium for years. Other fees including bank fees, late fees on bills, and last minute shipping charges are also completely avoidable. A little planning and a little patience go a long way to saving money.

Most of these mistakes are from being young and inexperienced. So in the end all we can do is hope to make as few mistakes as possible, plan a little more in our budget than we think we’ll need, and then learn from the mistakes when we do unsurprisingly make them.

What is one or two avoidable mistakes you made/make as a young adult?

Post by Jesse Jurgenson, Financial Counselor

3 Responses

  1. I agree with your article, I know when I was younger I thought nothing could harm me; I would do some dumb things. Now the medical bills are catching up to me, I have spinal problems along with joint problems which are now not ‘fixable’. Now I see my kids making mistakes trying to have fun and I try to tell them it’s not worth it, but as it has always been, kids won’t listen!

  2. ShiftAce

    Credit cards. Biggest mistake I have ever made. Read the fine print. That 0% sounds good; till you miss a payment or are late by a day – then it’s back to 24.99%. Good luck getting rid of that debt.

  3. Hi, thanks for the compliments!

    These mistakes are ones that I’ve made along with some of my friends. Medical bills are some of my biggest worries because they are long lasting and usually indicative of even longer lasting problems. The body doesn’t heal as quickly as a credit report. It’s hard to convince kids otherwise though.

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