5 Most Common Money Mistakes Young People Make Comments31 Comments

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Making mistakes is the only way that we can ever truly progress. When it comes to our hard earned money though, you’ll likely want to avoid making mistakes simply because they are so costly. Many people all over the world make the same mistakes everyday. It seems as though there is a common pattern. Here are five of the most common money mistakes that you should try and avoid, especially early on in your career.

Getting a Useless Degree

This is an extremely common mistake that I’ve seen several of my friends make. It is such a common and easy mistake to make because it is virtually impossible to make a sensible decision about what career you want or what you should study when you are 18. School is incredibly expensive, you want to be able to get a job with your degree after you graduate. It’s also costly in the sense that you could be out working and saving instead of studying and spending.

Find a field of study that you are passionate, and make sure there is a job market for it before you spend tens of thousands on your education.

Impulse Spending

Our society is addicted to impulse spending. Three bucks here, three hundred there, it adds up over time. Clever marketing tactics and a vast increase in the number of products available today have aided this trend, as has an increase in surplus cash in many consumer’s budgets.

The best way to escape this psychological and financial trap is to put a ’30 day buffer’ on all your non-essential purchases. Instead of just buying the new iPhone the second it hits the market, take 30 days and really think about whether or not that expenditure would really be a positive thing in your life.

Expensive Vacations / Holidays

Everyman and his dog nowadays seems to be going on long haul vacations to Australia, America and Thailand. Not as a one-off, or for a honeymoon, but all the time. Take the time to research what great holidays you can go on locally. Pretty much every developed country has some great destinations. If you travel within your country and save the international trips for very rare special occasions, you will save yourself literally thousands of dollars per year. Do your research and plan a trip that will be both entertaining and frugal.

Leaving a Balance on your credit card

This one has always baffled me. People earn great money, but still overspend and live beyond their means and put large balances on their credit cards and take out loans to get expensive cars that they don’t really need. Remember that however much money you make, you’ll always want more, and do not fall into the trap of leaving a balance on your credit card to buy items that you do not really need. If you leave a balance on your cards it will just keep growing as interest is tacked on, try to avoid that unnecessary expense at all costs.

Investing Without Knowledge

This mistake is made both by those who invest in the stock market or in private business ventures. There have been countless stories in the media over the years about people losing fortunes on the stock market. Unless you are willing to spend months researching what exactly it is all about; the risks and the rewards, it probably is smarter to invest in mutual funds or something similar than trying to pick your own investments. And before you invest in a business venture, it is essential to plan and research your niche thoroughly. What is the demand for your business? Who will you have to compete with? Can you compete with the ‘big players’ in your market? Who is and where are your target market?

If you can avoid making all of those big money mistakes in your life, you will be well on your way to living modestly and building real wealth!

Author Bio: James Petzke is the blogger behind This Is Common Cents, and is a currently a college student studying business economics. Be sure and also check out his other site, Deer Hunting Season Guide!

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This entry was posted in Financial Advice, and tagged Comments31 Comments
By : Adam | 9 Jul 2013
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31 thoughts on “5 Most Common Money Mistakes Young People Make

  1. Josh

    Great article and solid advice (particularly about the credit card – wish someone had told me that when I was 19).

    But the “useless degree” bit is maybe not stated very well. I get your point, but a degree is only as useless as you make it. I think its better to make the point that you should know what practical skills are needed in the “real world” for your chosen profession, then make sure you learn those skills while in school to ensure the thousands you spend on education actually benefit you.

    Reply
    1. James Petzke

      I would agree with what you said. But I’ve seen a lot of friends who end up hundreds of thousands in debt because they go to a fancy liberal arts private school, and then can’t ever earn more than $45,000 in their field. No other way around it, that would suck.

      Reply
  2. Adam @ Money Bulldog

    I like your final point about investing. The stock market has made fools out of many people who have jumped in without having enough knowledge and without doing enough research. Great post!

    Reply
  3. Thomas | Your Daily Finance

    I believe the worthless degree is a big one especially if you add to that they could have went to a very expensive college/university to get that worthless degree. Now you are in debt 60k+ with now job offers. In addition to vacations and holidays lets not forget those cars. So many will go out and the first purchase is a brand new car.

    Reply
    1. James Petzke

      Cars are definitely a big part of the reason many people go into massive debt. Not just the auto loan, but the cost of driving and insuring more care than you need is outrageous.

      Reply
  4. Rusty O'Connor

    This is a fantastic article,
    Out of all of these I think investing without knowledge holds the biggest risk. Young people know they should invest, but often have a greater appetite for risk. Seeking advice from mentors or seasoned financial planners can help keep more money in their pockets.
    Rusty

    Reply
    1. James Petzke

      Yeah investing without knowledge can really mess you up. It would suck to lose that little bit of cash you finally saved up because you didn’t know what you were doing.

      Reply
  5. #Broke Millennial

    Great tips except #1. A lot of people are passionate about a field of study that doesn’t have high earning potential. I studied journalism and theater, yet I’ve been employed steadily since I graduated. Plus, many people get jobs that had nothing, or very little, to do with their majors. I would say be more practical about how you’re paying for college and where you decide to go.

    I’m with you on on being baffled by people not paying off credit cards.

    Reply
  6. Sean @ One Smart Dollar

    I agree with most of this other than the vacations aspect of the article. Traveling is passion for my wife and I. Life is to short not to do the things you love. You just need to budget for them.

    Reply
  7. Chris @ Stumble Forward

    I completely agree with #1 on the list. My sister went to school for travel and tourism because she thought it would be fun to work on a cruise ship and realized after the fact that it was anything but that.

    Reply
  8. Amanda

    I got a worthless degree… and then a certificate and post-grad diploma in the same field. And $55,000 worth of debt. Some people may argue that my degree wasn’t useless, as I got a job before I even graduated in my field, but considering my manager only makes $40,000/year, it certainly wasn’t worth the price tag!

    Reply
  9. Canadian Budget Binder

    Some great advice here especially with the degree. My first degree was a worthless one as well. I have talked to many kids who just take something because they aren’t sure what they want to do and when they do they still really aren’t sure. I think taking more time to figure it out rather than just studying for the heck of it can be a costly error.

    Reply
  10. Pension Retirement

    There are many college degrees that provide no real prospects for employment. Many of those are liberal arts degrees. History, philosophy, literature, and the like have no real prospects for employment, at least in those fields. Many employers now require a college degree even if one isn’t required for work. Many employers just want to see that you could dedicate yourself to something for an extended period of time. But there really must be a better way to prove that.

    Reply
    1. Alexandra @ Real Simple Finances

      I think it depends on what you intend on doing with your degree. For myself, my English Literature degree is exactly what I need to fulfill my passion (teaching college level English).

      Now, am I using my English degree at my current job in a bank? Absolutely not! And that’s where I think you’re spot-on; employers like to see that you’re committed to bettering yourself in some way. It’s just unfortunate that some people spend lots of money on degrees because you “should” go to college, and then either find work outside their passion or worse, don’t find anything at all.

      Reply
  11. Alexandra @ Real Simple Finances

    Great points. I think that knowledge is key for everything on your list, not just investing. People spend beyond their means because they have the credit, and they aren’t informed about how badly they can hurt themselves financially!

    On degrees: I’m an English major, and so is my coworker. He consistently makes fun of our degree and finds it useless, while I am pursuing my MA to become a professor. I’m very glad you didn’t list any particular degrees here, because English is particularly ragged on usually! I think the difference between my coworker and I is that I set out with professorship in mind, and I chose a relatively inexpensive state school for my MA to keep the cost down. I also have two local colleges that offer PhDs for free, plus a stipend for teaching, that I intend to take advantage of.

    Reply
  12. AverageJoe

    I don’t think there’s anything wrong with dipping your toe in the investing waters without knowledge. For many people, actually investing helps them understand how different strategies work. However, I’m with you when it comes to all-out investing without knowledge. If you’re going to invest your life savings or all of your time, know what you’re doing first.

    Reply
  13. David S. @ PBC

    Young people make a lot of mistakes especially about finances. perhaps, this is one of the reasons why parents should take time to share their insights about money with the kids. Impulse spending, credit card purchases and holidays should be avoided if times are tough. Yes, avoid these money mistakes early in life.

    Reply
  14. Sam Gill @ Digital Spikes

    Yeah very much true, everyone does the mistake and learn. Agree on the useless degree and impulse buying… It is all about lack of awareness and self control

    Reply
  15. Mike

    Yeah, one of my “favorite” ones is watching kids go into $20,000 of debt to pay for a wedding. (And they are living with parents or in a 1 bedroom shack) It’s like the thought of paying off all their combined debt or putting money down on a home doesn’t even cross their minds.

    Reply
  16. Novabild

    It is never too early or too late to start saving. Even if it is only a small amount every week or month it can quickly add up. Not only that but you will start to form the habit of saving which is often times the hardest part.

    Reply

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