It is unfortunate that many young professionals do not worry about financial affairs. This is especially true for those in their 20s who feel that they are simply too young to dwell on financial decisions and planning. And then, when they are ready to get their finances in order, they often find themselves up to their ears in debt.
However, there are ways to get beyond these problems and live a debt-free life. The key is to recognize the mistakes you may be making and do your best to avoid them in the future. Listed below are some of the biggest finance mistakes young professionals make.
Living Without a Budget
All too often, young professionals tend to live way beyond their means. While this may be OK in the short-term, it can hurt you in the future. Their reasons for not controlling spending are many. However, there are two main reasons: they were not taught to live frugally, or they simply do not want to place restrictions on their entertainment expenses.
You must learn to make sacrifices if you want to succeed in the future. In short, never live beyond your means. Instead, create a workable budget and strive to stay within it. This may mean opting for an older car model rather than a luxury vehicle, or choosing to rent an apartment instead of buying that townhouse you like.
Paying Full Price for Everything
Another common mistake that many young people make is paying full price for everything, no matter what the product or service may be. You can save a wealth of money by searching for discounts before you make purchases. Rather than shopping at high-end boutiques and stores, buy your personal items and groceries from outlet or discount stores instead.
Additionally, if you have to go on a trip, shop around for discount packages first. If possible, you can save a lot of money by driving your own car. There are also many other terrific discounts you can look into, including savings with car insurance companies, auto repair shops, phone companies, hotels and even energy companies.
Not Saving Money
Another error that a young professional may make is not setting up a savings account. While you may think that it is not so important to save money right now, you never know what may happen in the future. Extensive car repairs or unexpected medical bills could quickly empty your bank account. Therefore, you should always be financially prepared.
By saving $20 or $25 a week, you can accumulate a good chunk of money in your savings account by the end of the year. In this way, if any type of emergency comes up, you won’t need to worry. You can also choose to put your money on a prepaid debit card, but be sure to use a card that does not have high interest rates or monthly fees.
Ignoring the Fine Print
Too many young professionals simply do not bother with reading the small print when signing paperwork or paying bills. That is a huge mistake. You should always review any documents you sign and bills you pay. If you do not, you may be paying more money than necessary.
Examine your bills and make sure that you are getting what you pay for. If you are being charged for services or “extras” that you do not need, quickly resolve any issues. You should look at any credit card or loan agreements, as well. Find out if you are being billed for outrageous interest rates or other dilemmas.
Making Mistakes on Income Taxes
Filing income taxes can be extremely confusing, especially for young persons. However, income taxes are required by law, and they must be filed every year by April 15. With that said, you should not wait to file your taxes. Complete them as quickly as possible after you receive your W-2 or 1099.
Since tax laws and deductions change almost every year, it is best to enlist the help of an experienced tax person or accountant. These professionals are aware of all the current tax laws and deductions. They will work hard to get you the best possible results. If you choose to file electronically, you won’t need any money up front, and you can get your refund in as little as two weeks.
Begin the Road to Financial Freedom Today!
These are just some of the biggest finance mistakes young professionals make. Other lapses in judgment include failing to invest in health insurance or car insurance, making charitable contributions to questionable nonprofit organizations (rather than established ones), overextending credit cards or checking accounts, and not planning for retirement.
You can easily avoid these mistakes by changing how you spend and handle your money. When you make prudent financial decisions and live within a carefully-planned and reasonable budget, you will be on the right path to financial freedom.
Jayson Mullin works for Top Tax Defenders. They are a tax resolution company that provide criminal tax defense against IRS investigations.
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