8 Biggest Personal Finance Problems of a 20 Something Year Old

Stuck in a low-paying job?

Credit cards maxed out?

Bought those sneakers instead of saving money, again?

Nodded to all those questions?

If yes, then you’re probably in your 20s & are learning how to handle money.

This might feel a little overwhelming but it’s important to know how to smartly take control of your money.

As a 20 something, here are 5 personal finance problems you might face & how to solve for them:

1. Not Having A Steady Source Of Income

Having a regular paycheck is like having a warm blanket for your bank account. It has got you covered.

When you don’t have a steady income, it becomes a little tricky to do the basics – budgeting, saving for the future, and managing expenses.

Honestly, it could also lead to other personal finance problems. But here’s how you can deal with this situation:

You can start a side hustle, take on freelance or part-time work to stabilize your income.

Focus on ways to manage your expenses better & only spend on things you really need.

2. Overspending On Non-Essential Items

Let’s say you’re scrolling through Instagram & you see your friends post a story of themselves in Goa. There is a possibility that a travel bug in you is awakened.

Not to forget how easy it can be to book those tickets in one click.

This FOMO (fear of missing out), ease of buying things & craze behind instant gratification usually leads to impulsive spending, leaving you with less money for more important things.

It is essential that you plan & prioritize your spending in a way that you’re able to save for tomorrow.

3. Being In Credit Card Debt

Maxing out your credit cards is as easy as buying things with it! Ironic right?

While it might be stressful to see that piling debt, the most important thing is to navigate your way out of it.

You could start by repaying the minimum amount, converting the outstanding amount into EMIs or even talk to your credit provider, asking for a settlement plan.

Also Read: Personal Loan EMI Calculator

4. Not Being Able To Build An Emergency Fund

Okay let’s recap a little…

You are in a situation where overspending is easy & things are more expensive. Not to forget the possibility of being stuck in a low-paying job.

It is natural to feel that building an emergency fund is difficult.

But the key here is to be consistent with your monthly savings and make it a priority.

You should adjust your spending habits and find creative ways to reduce expenses, because the peace of mind that comes with having an emergency fund is worth the effort.

5. Lack Of Knowledge On Personal Finance

Mastering your personal loan by personal finance skills is as important as learning how to drive or cook. It makes you more independent & helps you make more informed decisions about spending, saving & investing.

It is likely that you did not learn about personal finance because most schools & colleges don’t focus on it.

But there is no better time to start than today.

Make use of trustworthy learning resources, both online & offline.

Sign up for free seminars.

Talk to experts to gain more financial knowledge.

What you need to do is invest some time, have some patience, and get a little help.

You can start here with Zype’s blogs & start learning more about personal finance & money management.

6. Pressure to Keep Up

Social media can make anyone believe that everyone is out there living their best life. Latest gadgets, vacations, concerts, sneakers, and the list goes on. In such circumstances, anyone in their early 20s might feel the pressure to keep up with the trends.

This pressure often leads to reckless spending and impulse purchases. 

However, the goal is to strike a balance and create a budget that gives priority to both – your needs and wants. This can help you lift off a lot of pressure.

7. Limited Income

Your early 20s is the time when you’re fresh out of college and are just starting out your career. During this time, it’s very common to be on a tight budget due to a limited income. 

With a limited income, it can be tricky to manage expenses like – rent, utility bills, groceries and all other non-essential expenses. 

In situations like these, you can always consider taking up a side income.

8. Unstable Job Market

Entering the job market in your early 20s can be confusing. And the unstable market doesn’t make it any easier. Consistent layoffs, entry-level positions, uncertainty of contract, and lack of job security add more financial burden. 

Maintaining an emergency fund and keeping more than one source of income can always help in stabilising your situation.  

Top 5 Financial Mistakes to Avoid in Your 20s 

Getting Advice From The Wrong Source

It’s extremely important to get the right kind of financial guidance from a trusted source. Sometimes, channels like social media or the internet can provide bad advice which can worsen your situation. Choose to seek guidance from financial counsellors, trusted websites and books to make an informed decision. 

Not Paying Off Debts In The Optimal Order

One of the biggest financial mistakes to avoid is being in debt. While taking out personal loans is a great way of building your credit score early, it’s important you pay them off on time and in optimal order.

Not Taking Full Advantage Of Employer Benefits

One of the easiest ways of saving money in your early 20s is making the most of your employer benefits. Making use of insurance, travel benefits, etc. are some perks that can help you save a lot of money.

Trading Convenience For Savings

Choosing convenience over saving can cost a lot to your future self. While facilities like food delivery and same-day shipping have made life easier, it’s important to keep your budget in mind and also prioritise your savings.

Choosing Short-Term Experiences Over Long-Term Savings

Sometimes choosing instant gratification and short-term experience means not choosing long-term savings. It’s important to keep a budget for your wants and desires so you’re not financially burdened. In fact, doing this can make your experiences even more memorable. 

How to Navigate your 20s?

It can be a little tricky to navigate your finances in your early 20s. But the right advice and practices can make it the most prime time of your life. 

Make sure you set your short and long-term financial goals along with a budget that works for you. Look for financial advice from trusted sources like a financial advisor or trusted websites. 

Implementing these small changes in your early 20s can help you secure a very bright financial future!

In Conclusion

It is important to remember that you might face personal finance problems as a 20-something year old but with small changes & a little effort you can overcome them.

By acknowledging these challenges & being proactive towards solving these is the first step towards a more secure financial future.

Also Read: The Dos and Don’ts of Personal Finance Planning