Transcript
Here are the three big money mistakes we see people in their 20s and 30s make.
Number one, not building an emergency savings. Life happens. Your car breaks down, you have to take your dog to the vet, you get laid off. These things happen, and they happen to everyone. Having at least three to six months of expenses set to the side for when these things happen puts you in a way better spot. A lot of people think they can use a credit card to get out of short-term trouble. You can, but that can put you in a tough spot too, because debt is the enemy of building wealth.
Mistake number two, not contributing to a Glossary of Financial ClarityRoth IRANamed after Senator William Roth, who pushed it into law in 1997. The design is clever on both ends: you pay the tax now instead of later, so the government collects its revenue up front, and in exchange your money grows and comes out completely tax-free in retirement. You put in dollars you've already been taxed on, let them grow for years, and qualified withdrawals down the road owe nothing. You're basically betting your tax rate later will be higher than it is today, which is why it tends to shine early in a career or in a low-income year.General education only. Not tax or investment advice. Read the full story or your employer retirement plan. This is a huge deal. Your 20s and 30s are the most impactful years when it comes to Glossary of Financial ClarityCompoundingYour money earns money. Then that money earns money too. (Yes, read that twice, that's the whole trick.) It feels painfully slow at first, and then the snowball gets big enough that the growth dwarfs whatever you actually put in. Time is the one ingredient you can't add later.General education only. Not tax or investment advice. Read the full story, so saving early and often goes a long way once you're 60 and 70 years old. My advice: any amount is a good amount. Even if it's 20 bucks a week, it's better than nothing. You do not get these years back, so take advantage of them.
Mistake number three, not saving more when your income grows. So many people get caught up in lifestyle inflation. They get a raise, they get a bonus, and they don't save that increase. You have to do both things: as you get increases in pay, you also have to shift up your savings rate. When you get a raise or a bonus, I know it's hard, but try to shift at least 20% of that increase into savings or your retirement plan. It will make a huge difference down the road.
Building wealth in your 20s and 30s isn't about perfection. People get it wrong all the time, myself included. No one's perfect. But if you just try to avoid these small mistakes, it makes a huge impact later down the road. It'll set you up for retirement.
Hosted byShane DuckworthPartner | Private WealthView bio →
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