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If you are in your 20’s or 30’s, there’s no better time for you to start your financial journey than now. The best time to start was yesterday and the second-best time to start is today.
Your 20’s and 30’s, from a financial standpoint, are the most important decade of your financial life. And why is that? in your 20’s, you’ll likely try to find out an ideal career path that suits you, what your passion is, what your purpose is and, what to focus on.

These decisions will drastically affect your financial life in the long term since you’ll dedicate most of your time and efforts to pursuing that career you’ve chosen which will serve as your source of income.

In your 30’s, you should have gained some experience along the way, become a little bit mature and, probably gotten some boost to your income as you transition from an entry-level in your career to something bigger than the previous, which tend to come with tons of temptations like; getting a new car, constant holidays overseas and, getting a new house.

Getting a new car or house is not a bad idea, but the thing is they’re just money traps you should probably avoid in your 20’s, 30’s, or even 40’s in order to put yourself in a position of financial success and be able to provide a better future for yourself and family.

1. Not Investing or Not Investing Enough For Retirement

In your 30’s, you might think you have enough time, you still have about 35 years before you could retire. Well, while that is true, you need to realize that you don’t have enough time. Most people wait too long before they start investing and they think ‘maybe I should wait till I make more money then I can start investing’.

The question is, while they wait, does time wait? that’s a NO, time waits for no one, and as time keeps moving you keep getting older. You can take advantage of Time utilizing the power of compound interest, Using it accumulate your wealth even if it’s just by putting aside a little bit amount of money every month and investing it for the long term.

Let’s say you invest $10 000 2since you were 30 years old and your investments produce 7% annual return, by the time you get to 65 years old you would have $1.4M. However, if you wait till you’re 40 years old you would just have $650 000. Time becomes your friend and a tool for wealth creation if you use it wisely. Don’t wait to invest, rather, invest and wait.

2. Sacrificing Your Future Today

This is the most common money trap that most people fall into especially young people who just can’t wait for 5, 10, or 20 years before they begin to enjoy life. The idea of enjoying life when you’re old sounds dumb and I agree with you. But the thing with life is, you can’t just live for the present because life is set in such a way that you either enjoy a little bit today or enjoy a lot later in your life.

Life indeed is now and not tomorrow and if you can’t enjoy the present you won’t be able to enjoy the future especially when you’re not guaranteed to live to that future. However, it is what you do now that determines tomorrow, if you use up all you have today you won’t be left with any tomorrow unless you keep working each day till you die in order to satisfy your needs and wants.

Enjoying life isn’t all about spending money, you can perfectly have fun without having to spend a lot of money. Just like the childhood days when you had a great time with friends without having a dime in your pocket. Living frugally at the beginning of your financial journey will give you a head start in your journey. It’s all about your perspective, if you’re used to satisfying your urges with spending money then you probably need to 
start working on it.

3. Not Setting Financial Goals

One of the first steps to take in the track that leads to failure in life is the lack of goals and plans, which can be translated as living your life to chance. This applies also to your finances and is a major trap. If you’re looking forward to going the distance and building wealth, you need a goal and a plan. A goal will act as the destination while the plan is the road map you follow to that destination.

A lot of people today have no defined financial goal, when asked about their financial goals in 2,5, or 10 years from now, most people tend to say “ I want to be more successful and make more money”, it’s not clearly defined how much money they want in their bank account or in investments?

Clarity is power and power is the ability to act, when your vision is clear the path becomes easy, but when you’re vague and not so sure of your financial goals then you’re just all over the place.

Setting a goal is the first move, seeking advice from a professional on how to get it, is also important in order to get reliable advice, this is your hard-earned money and you probably don’t want it to be a disaster. Not setting financial goals does not just make your money a disaster, but it will also make you lavish your money on things that are unnecessary since there’s no financial goal they should be assigned to accomplish.

4. Investing it All

This might sound a little bit awful as it might seem contrary to what we’ve been saying all this while, but there’s no point to raise an alarm since it really is not contrary.

Here’s the thing.

The feeling you get when you start investing is awesome as you begin to feel proud of yourself for starting out. 
Investing all of your money is not a good strategy. For example, let’s say an economic disaster happens and you lose your job, you’ll need some money to cover up for your expenses for the number of days you stay unemployed and if you don’t have enough you might end up going into debt.

That’s where an emergency fund comes in, figure out how much you spend per month and make sure you have at least 3–6 months of savings in your bank account. Dividing your investments money and allocating some to your emergency fund until the number of months you set aside for yourself, by doing this you’re fortifying yourself against disasters in the short term.

Investing it all at the beginning might not be the best approach starting out your investment journey, set out an emergency fund for unforeseen emergencies. Apart from unforeseen emergencies, an emergency fund can be used to grab opportunities when they appear suddenly such as an investment opportunity that just presents itself, you could use part of the fund to grab that opportunity at its early stage.

5. Not Having a High-Income Skill

With the cost of living and inflation going up, each year things are getting more expensive. The money you use to buy a certain amount of things keeps getting thinner and thinner every single year. And, let’s just say the cost of living is going up by 3% every year and your salary remains the same, that means you’re getting 3% poorer each year compare that to 5 or 10 years you’ll likely see why most people struggle since the rate the income is growing is not as fast as the rate of inflation.

That’s why you should strive to increase your income every year actively. You’re actually getting behind if you’re staying the same.

A high-income skill is not a side hustle. High-income skill is income on your own terms, meaning you can generate income when you want, where you want, and with whom you want. A high-income skill is not a job it’s rather a skill set you offer to the marketplace in exchange for money.

Some of the high-income skills are blogging, copywriting, digital marketing, consulting, etc whatever skills that you can offer from the comfort of your home that is beyond your current occupation.

Not having a high-income skill puts you at a huge disadvantage because you’re kind of restricted in your earning potential, there’s a limit to how much you can earn. As the cost of living and inflation rises, a high-income skill will serve as an edge over them making sure your earning power and income increase as well.

6. Financial Illiteracy

This is an interesting fact, right from when we were kids, we were taught how to read and write and solve mathematical problems making us literates in those areas, but we were never taught how to be financially literate which is why we have so many financial problems in the society today because we were never taught about financial literacy.

Financial literacy, in this case, is not about being an accountant, but it’s about knowing some of the basics such as; budgeting, being able to read your own basic financial statements, understanding credit cards and debts, tax, mortgage, understanding some of the basic terms in terms of interest rates and loans, 401k, or some basic investments such as real estate or index fund, having a basic understanding of how they work and not necessarily being a sophisticated investor if that’s not what you want. Just the basics alone can add up a lot.

In the financial world, ignorance will cost you money. You mustn’t know all there is to know about finance but, just like in English, you probably don’t know how to write a poem or an essay but you sort of know the basics, you could read the alphabet from A-Z and combine them to form meaningful sentences. That’s all you need to get started in finance.

You could help yourself out by educating yourself about finance through books from experienced authors or maybe following a blog like this in order to get educated.

7. Buying a House You Can’t Afford

A lot of times, most people in their 30s are thinking about marriage, they are thinking about settling down, and probably thinking about having kids. Maybe they are already married and have kids, one of the mistakes they mostly make is “trying to keep up with the Joneses”, just because their friends own a certain kind of house or live in a particular neighborhood, they also want that kind of house or neighborhood just to compare with other people, they’ll end up buying a house they actually can’t afford.

When it comes to buying your own house, you have to understand that it is an expense that affects all other expenses. This means that the more expensive your home is the more expensive your homeowner insurance, your utilities, where you shop, where your kids go to school, what car you drive, affect your other expenses.

It’s not just the house itself but everything that goes with it and it’s very important that you understand it. Most people when they buy a house they can’t afford, suddenly, all other expenses go up dramatically and they begin to get into debt.

When it comes to owning your home, it’s a good practice not to spend more than 20% of your current net worth on your primary residence, say your net worth is $1M you shouldn’t spend more than $200,000 on your primary residence.

If you don’t have a net worth or haven’t built one yet and maybe you just have income, the same practice still applies, for example, let’s say your family total income per month is $10000 per month, you shouldn’t spend more than $2000 per month on your primary residence.

The number might seem low, but the reason to living more frugally with your house is to make sure that you have more money to save and invest long term wealth compared to making $10000 a month and spending $4000 a month on your primary residence adding that figure with all the other expenses, it will be more difficult to have anything left by the end of the month. Do the math.

And for a bonus,

8. Not Being Patience

This is definitely a common trap, whenever you make an investment and things go south, most of the time you’ll be tempted to panic and back out of the investment. After some time you see the same investment headed north, but this time, way more, you’ll most likely regret why going out of the investment in the first place. Thinking to yourself that you should have done more research on the particular asset or company and maybe waited a little more.

Ups and downs are normal in the stock market, but a lot of people pull out real quick. Think of bitcoin recently, it plummeted significantly and after some time crossed a new milestone. But wait, that doesn’t mean that just because you’re waiting it’s going to grow, but if your investment is based on real analysis that proved that a particular asset is and will be worth a certain price, then you should not worry about it, just buy and forget about it.

When it comes to buying something expensive, you just fill the urge to swipe that credit card and get that thing as soon as possible, the next day you realize that you would be perfectly fine if you haven’t bought that thing.

So if you’ve been a little patient and went back home and thought on it, you would’ve probably changed your mind the next day and saved yourself a few hundred or even thousands, but it’s really difficult since we’re living in this consumer-based economy where our lives move forward by spending money.

You’ve read this far and here’s a question for you, what’s the biggest money trap that you’ve been a victim of?

Getting constant financial education enlightens you on the financial path and reveals traps to avoid while exploring it.

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