4 Financial Decisions Young Adults Make That Are Hardest To Undo
Most financial mistakes don’t feel like mistakes when people make them. They often feel justified or even necessary in the moment. But some decisions can follow you for years, shaping what you can afford, where you can live and how quickly you can build wealth.
Experts share the financial decisions that get young adults in trouble because they’re difficult to undo. The good news is most aren’t permanent — but they do come with a price.
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Taking on High-Interest Debt
Credit card debt is one of the fastest ways to limit your financial future, according to Hillary Seiler, senior credit counselor, certified financial educator and founder of Financial Footwork.
“At any age, high-interest debt can set you back. Between ignoring the rates, not understanding the loan terms and only paying the minimum, it becomes a cycle that’s hard to break,” she said.
However, young adults often make these decisions because they can’t see the consequences down the road, according to Amy Wohlsein, accredited financial counselor and founder of Financial Coaching with Amy. Credit misuse and taking on debt without a clear repayment strategy are among the most common mistakes she sees.
Misusing Credit Early (and Damaging Your Score)
Your early credit behavior affects your ability to borrow and impacts your ability to finance a car, buy a home or even get approved for basic things like an apartment in the future, Seiler said.
“Credit is access. If you do it wrong, you’re limited in that access and it will cost you thousands in the long run,” she said.
Keeping your credit utilization low is key, Wohlsein said. “Use less than thirty percent of your available credit and ideally under ten percent. Even if you pay your card off monthly, a high balance mid-cycle can lower your score,” Wohlsein added.
Engaging in Lifestyle Creep
Young adults who earn more will often do such things as financing a new car, upgrading their tech or even use Buy Now, Pay Later to purchase things they don’t really need, Wohlsein said.
Paul Ferrara, chartered investment manager and senior wealth counselor with Avenue Investment Management Inc., said that the financial choices that are the most difficult to reverse are those where you “put a legal signature on a depreciating asset” — such as a car.
“A lot of young earners invest in five hundred dollars monthly on a machine whose value is going down each and every day,” he said. You are committing to years-long service under a liability that is reducing your monthly wealth-building even before you take your paycheck.
Delaying Investing (and Losing Time)
Time is the one thing you can’t get back, the experts stressed. “You cannot rewind to 2015 and invest your money on summer jobs to realize the growth in the previous ten years,” Ferrara said.
“Start now,” Seiler said. “The earlier you start, the more time your money has to grow. You can recover from a bad investment, but you can’t recover lost time. That’s your biggest issue.”
Even small contributions early on can grow significantly over time.
How To Fix Financial Mistakes Before They Get Worse
While these decisions can be costly, they’re rarely permanent but they do require effort to unwind.
Face any mistakes head on, Seiler advised. “Make a plan and get clarity now on how you’re going to tackle the mistake, its monthly cost and your timeline. Add it as a line item in your budget and knock it out month by month.”
Whether it’s debt, delayed investing or lifestyle creep, the real cost is often time. The sooner you recognize the pattern, the sooner you can start rewriting it.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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