6 Most Common Money Traps To Avoid In Your 20’s and 30’s

Avoid these 6 common money traps to greatly improve your finances and put you and your family in the best possible situation moving forward.

1. Stop Buying Liabilities

First things first, you should know the difference between an asset and a liability if you want to know what money traps look like so you can avoid them. Put simply, assets put money in your pocket while liabilities take money out of it. The more liabilities you have, the more of your income goes out the door.

2. Stay Out Of Credit Card Debt

Credit cards are attractive – yes. But, they’re also deceiving if you don’t know how they work or don’t use them properly.

If you do choose to keep your hand on them, just make sure it’s not too heavy. And pay attention to things like when the APR promotional period ends, what your APR is and everything else attached to the cost.

3. If You Buy A Car… Buy Used & Put At Least 30% Down Payment

One of the easiest money traps to fall into and to avoid is financing a new or semi-new car with a loan. One day, you walk out of the dealership feeling great about your new car. The next, it lost 30% of its value and, before you know it, the car is worth less than the amount left on your loan – this is called an underwater loan.

So, steer clear of the “no money down” commercials and do the math before you buy. But, if you’re already stuck in a auto loan, their is some good news – this is one of the easier liabilities to turn to an asset.

4. Stop Relying On Only 1 Source Of Income

Money is a two-way street – income and expenses. And one thing that keeps people going in circles is solely relying on their work income. Instead, think of money more dynamically. What if you could pay all the bills with your work check and save or invest the other?

If you feel this is you – start working on building a 2nd source of income on the side.

5. Avoid A Mortgage, Rent Instead

Another tempting thing to do early on, post-college, is to feel as independent as possible, as quickly as possible. Sometimes to the point of putting yourself in too deep a hole before you’ve established yourself. And, before you know it – you can’t get out.

No one can tell you what’s best for you – just make sure you feel you’ve established yourself and are confident enough in what you do. And if you already have a mortgage and are looking to rent a room or two out – just like your car, you can easily turn this into an asset as well.

6. Stop Buying Unnecessary Stuff, Especially Stupid Stuff

This one speaks in parallel to Warren Buffet’s quote from the start of this article, “The chains of habit are too light to be felt until they are too heavy to be broken.”

If what you bought still doesn’t make you happy or find it’s usefulness 3 months after the fact, then that’s probably a good indicator it’s not worth buying in the first place.