Robert Kiyosaki said that financial freedom is available to those who learn about it and work for it. The way you think about money can affect your financial future. Another well-known financial commentator Ben Stein is always sure to tell everyone how his younger self made sure to take care of his older self by coming up with a solid savings plan and avoiding common traps in your 20s.
Some of the misconceptions that young people in their 20s have about money are:
I do not need to start saving until I am in my 30s: This is a common misconception that young people need to avoid because starting to save when you a young enables you to take advantage of compounded interest. In addition, your young age creates a longer investment horizon and the opportunity to take on more investment risks.
Only rich people invest: There is no excuse to not investing your money, start now and build your cash reserves patiently.
My parents made it and so will I: Our parents’ assets are not our assets and just because they made it, you have no idea what it took to get them to that level.
I do not need to worry about retirement: Even though there is very little joy in saving for your retirement so early in your 20s but it makes a huge difference in your later life as Ben Stein said above.
All debt is bad: If you have a god credit score, debt, when used correctly can be a tool that provides leverage towards enabling you to reach your financial goal.
Bad debt cannot happen to me: Debt can happen to anyone who makes a bad financial decision, and it can be as simple as living beyond your means. When this catches up you may not be able to get a lifeline to get you out of that situation.
Debit cards are superior to Credit Cards: This is wrong; the problem with either of those is your spending habits. A debit card can easily deplete your finances just as easily as a credit card.
I do not spend that much: Most of what can deter you from your financial goals is spending on everyday stuff. You should create a budget and strictly follow it to avoid this problem.
Financial advisors always give advice that is geared towards my best interest: Even though they may present themselves as a trusted advisor, it is their job to sell products and some maybe biased because they are looking out for their own bottom line in the transaction.
The key to a prosperous financial future is simply ‘Living within your Means’. It may sound easy to follow but know that every choice you make has an effect on your ability to save and live within your means. Get control of your finances TODAY!
Further reading: 4 Common Misconceptions About Money that are Keeping You From Getting Rich