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Personal Finance

The top money mistakes people make in their 20s

Below are 10 top money mistakes people make in their 20s and how to avoid them.

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Income, Financial skills everyone should master (1), Financial decisions for 2020, Between saving, investing, speculating, trading & gambling

In your 20s, you are either in your last year in the university, just starting your career or setting up a business. Either way, you are still new to many things and just building up yourself.

Your 20s is the time you learn, make mistakes and grow. People say you can’t grow if you don’t make mistakes; however, there are some costly mistakes you should try to avoid. They might end up helping your growth but spoil a lot of things before then. One of such mistakes is money mistakes.

Money mistakes are made when you don’t have enough financial knowledge, and this can land you in debts you have to keep paying for, years after. Below are 10 top money mistakes people make in their 20s and how to avoid them. These tips would help you to make wise money decisions from now.

Read Also: What you should not do when you just receive a severance package

EMOTIONAL SPENDING

The top money mistake young adults make is emotional spending; Many spend to make themselves feel happy. If your happiness is tied to spending, you will have a problem trying to save up or plan for the future.

SUBSTITUTING GROWTH FOR MONEY

In your 20s, you are just starting your career. You will have many job offers with mouth-watering pay. It is only logical that you choose a job that offers growth instead of money, if you are interested in making more money in the future. You might want to start making enough “dough” now, but in the long run, if you don’t increase your value, you are going to remain stagnant.

“NOT CUTTING YOUR COAT ACCORDING TO YOUR CLOTH”

Young adults tend to spend more than they earn because they want to stay in vogue. This is a common money mistake many make. If you spend more than you make, you tend to run into debt quickly and become financially unstable. Your 20s are not the time to live in luxury (unless you can afford it) or buy the things you cannot afford. If you will save more when you stay with your parents than if you stay alone, why not stay with them? If cooking at home would save more costs than buying food from restaurants, why not cook at home? Don’t live beyond your means.

Read Also: How to increase your income from one to many

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SITTING COMFORTABLY IN DEBT

Many young adults are comfortably sitting in debt. Understandably, some situations might warrant you taking loans like student loans or personal loans. However, it is a wrong move to stay in debt for a long time. You should save up or look for other sources of income to settle your debt. ‘Don’t sit comfortably in debt’.

NOT SAVING UP FOR EMERGENCIES

Emergencies are money-draining circumstances that are unplanned for. To prove that you are financially stable in your 20s, you should save up for emergencies. Young adults often make the mistake of not saving up for emergencies, hence, hitting them hard when it (emergency) comes.

NOT HAVING A FINANCIAL PLAN

For every facet of life, it is essential that you have a plan; however, having a financial plan tops it all. Having both short and long-term goals shows that you are serious about being financially stable.

Read Also: Automakers need to create greater value for Nigerians – GAC

NOT KNOWING THE DIFFERENCE BETWEEN “NEEDS AND WANTS”

The importance of knowing the difference between needs and wants cannot be overemphasized. In your 20s, you should know the things you truly need and the things you can do without. Your needs should be 90% of your budget if you are seeking to become financially stable.

RELYING ON ONLY ONE SOURCE OF INCOME

Have you ever stopped to ask yourself, ‘what if I lose my job?’ or ‘what if this business crashes?’ It is very risky to rely on only one source of income. You are most energetic in your 20s; it should be the time you take on different jobs to earn more money.

SPENDING AIMLESSLY

As a young adult, you must track your spending always. There are many tools and mobile apps available to do this. Track your spending to make sure you are not spending more than you are receiving. You can do this by putting down your expected monthly income and plan how you are going to spend it, including your savings and emergency fund to the expenses. This way, you don’t buy on impulse because you have a financial vision for the month.

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NOT HAVING HEALTH INSURANCE

Many young adults don’t see the need to have health insurance, and this is a huge mistake to make. Health insurance gives you peace of mind and saves you from spending more. It also shows that you are concerned about both your health and your finances.

Read Also: Lessons from Feranmi: What I learnt from my failed business

We have not only discussed the money mistakes people make in their 20s but also put out tips on how you can avoid them. You don’t have to make these mistakes too before you learn how to be financially stable in your 20s.

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    Financial Services

    How to invest in Nigerian Eurobonds

    Before investing in Eurobonds, weigh the bond’s risk characteristics and set them against the interest rate to know if it is worth it.

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    Treasury Market T-bills, African Finance Corp. issues $750 million 7-year Eurobond at lowest yield to date

    As of 2019, Nigeria’s Eurobonds were regarded as one of the top 5 best-performing Eurobonds in the world.

    Although Nigeria’s Eurobonds remain one of the most profitable in the investment world, not many individuals know how to invest in them. The Federal Government and a number of corporate organisations in the country subscribe to Eurobonds and issue them quite often, lending credence to their attractiveness as an investment tool.

    What is Eurobond?

    Basically, Eurobonds are financial instruments issued by a country or corporate organisation in a currency different from the currency of the issuer.

    Nigeria typically issues Eurobond instruments denominated in US dollars. For example, the 6.75% $500 million January 2021 Eurobond was denominated in US dollars.

    There is the sovereign, which is referred to as a government bond, and the corporate bond. Eurobonds operate like fixed income securities in terms of bond instruments. It has a coupon, an interest rate paid on bonds (which is paid bi-annually), a price at which the bond will be purchased, and also a yield.

    The price and yield have an inverse relationship meaning that when the price goes up, the yield comes down. When the yield is coming down, the instrument is trading at a premium compared to when it was issued.

    An investor can buy Eurobonds while the primary auction is ongoing or later, at the secondary market, for those who were unable to participate in the primary auction.

    READ: Nigeria’s Eurobond yield hit 12.8% as investors flee emerging markets

    How to invest in Nigerian Eurobonds

    The process of investing in Eurobonds in Nigeria is not any different from that of investing in local bonds. Both bonds can be bought from either the primary market at the initial offer level or at the secondary market for existing bonds.

    All that is required is for the investor to complete the tender for the Federal Government of Nigeria or corporate bonds form, submit the tender through any of the authorized dealers and make the required payment when the bid is successful.

    Basically, for banks, your account has to be funded with the desired currency. For instance, to buy a dollar-denominated Eurobond which is the conventional one issued in Nigeria, you have to fund your account with dollars, then send an instruction for the bond purchase.

    READ: FG redeems $500 million Eurobond

    Be mindful of the bond’s risk profile before investing

    Eurobonds can either be corporate or government bonds. Corporate bonds may offer higher interest rates than government-issued Eurobonds but they also come with higher risk.

    If you want to invest in Eurobonds, ensure that you weigh the risk characteristics of the bonds and set them against the interest rate to know if it is worth it. Most Eurobonds come with credit ratings, which serve as a measure of their quality and risk profile.

    Usually, bonds with the highest quality credit ratings come with the lowest yields while bonds with lower credit ratings offer higher yields. The yield, in this sense, is a measure of the bond issuer’s creditworthiness meaning that the greater the credit risk on an investment, the higher the yield investors would demand to compensate for it.

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    READ: Investing in Nigerian Bonds – A Beginners Guide

    How to obtain an FG Eurobond

    When bonds are issued at the primary market, the issuance document contains a list of the banks or brokers that have been authorized to sell the bonds. The FGN issued bonds are purchased through the Primary Dealer Market Makers (PDMMs). These are banks appointed by the Debt Management Office (DMO), to act as authorized dealers of FGN bonds.

    Can you fund a Eurobond with a naira account?

    Not at the moment! You need a dollar account (domiciliary account) that is funded but your bank can easily guide you on how to obtain one.

    Next is to fill out instruction documents after which the bank will send you a market price and the expected yield. The bank then debits your account for the purchase. Every six months or on the specified coupon dates, you will receive your coupon and at maturity, you will get your principal back if the issuer does not default. A coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from the issue date until maturity.

    READ: How to read stock market tables

    Here is a simplified example of the process:

    You walk into a branch of your bank and ask to purchase $100,000 worth of Eurobonds. Note that your domiciliary account should already be funded with the amount. You would be required to fill out and sign the letter of instruction which would then be sent to the bank’s treasury unit for processing. The treasury unit responds with the available Eurobond prices and requests you to confirm the purchase. When that is done, the treasury unit executes the deal and holds it in their custody.

    You can also sell the bonds at the secondary market.

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    Minimum investment as an individual

    The minimum conventional investment tranche is $200,000, but a $100,000 worth of investment is also permissible. Amounts lower than this are however problematic because the secondary market trades in tranches of $200,000.

    READ: Your “beard gang” is affecting the valuation of this global firm

    Can people invest through mutual funds?

    Basically, what mutual funds do is amass investors’ funds and buy Eurobonds in the secondary market. A mutual fund is just like a vehicle that helps you to buy bonds so that you are not faced with the issuer’s risk directly. Therefore, individuals or institutions can also buy Eurobonds through mutual funds.

    Mutual funds make it possible for you to participate in bond-buying with less than the statutory amount since they operate by pooling resources together from a large number of investors.

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    Financial Literacy

    How to grow rich with the power of profitable relationships (Part 2)

    The idea that you can build rich relationships with zero value is best left at Disney land.

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    How to grow rich with the power of profitable relationships (Part 2)

    Hello friends, to catch up on this topic, you can read up on the first part by clicking here. Now let’s continue…

    The two rewards for solving high-income problems

    There are two rewards you can get for being a high-income problem solver. The first is the value reward and the second is the cash reward.

    The value reward is earned when you enter into relationships solely to extract value. This means that someone has what you need to succeed and you have what they need to succeed. And both of you are willing to enter into a value for value exchange relationship.

    For example, if you need a job and you meet someone that can help you get a job. And if this person needs contacts or a certain service that you can provide. Both of you can enter into a value for value exchange relationship and solve your problems. The important thing for this kind of relationship to work is that both of you must come to the table with value. And the value must be comparable and worthy of the exchange.

    READ: How to move from middle class to upper class (Part 3)

    The idea that you can build rich relationships with zero value is best left at Disney land. Frankly, it never truly works this way. In the corridors of wealth and power, it is value for value. This is why the rich keep getting richer. They are always exchanging value that creates more wealth. If you want to be rich or build profitable relationships you must approach relationship building this way. You must bring value to get value. And you must constantly strive to increase your personal value every day. The value for value exchange is common in the relationship among peers, friends, and business partners. It is also common in the relationship between the older and younger generation.

    Right now, there are certain relationships that you need in your life. But those relationships will not just fall on your laps for nothing. You need to have what these relationships need to attract them to you. And you must become a person of value to attract them. Success in the value for value exchange relationship thus begins with first becoming a person of value.

    READ: How to earn over 20% returns in real estate in Nigeria

    Sometimes a financial reward is what you get in return for solving high-income problems. This is common where there is a customer involved. And where a problem can be solved using products or services. When you engage in a customer-type relationship you must offer products and services, that can solve customers’ problems in exchange for cash. And there are two ways to achieve this.

    The first way is to sell your own products and services to customers. This is a slow and laborious way especially if you are a working professional. The second way is to find products and services that are already selling. And are owned by companies or organizations that you care about. And then sell them in exchange for income. This is the faster way. All you need to do here is connect people who need a solution to the companies that can offer those solutions. This is what I call Relationship Brokering and it simply means connecting two people who need each other and getting paid for your connection. To succeed as a relationship broker, you must become a value connector and this brings us to the second point.

    2. Become a value connector

    Becoming a value connector means connecting people with a similar problem that you have solved or are solving with the organizations that have helped you solve the problem or are helping you solve the problem in exchange for cash. It is connecting people that need help with those that can help them. And it means that you must first solve a personal problem for yourself, then partner with the company that helped you. And then find people with similar problems who are ready to solve them.

    Successful value connectors thus build three kinds of relationships. They build-relationship with business owners. They build relationships with customers and they build relationships with other value connectors. The key to succeeding as a value connector or broker is to focus on solving high-income problems for yourself. And to choose companies that you have used, tested, and trusted.

    You must also ensure that the company you choose has a good reward system that can help you earn a high income or at least is willing to negotiate one with you. If you do this successfully you will not only transform your life, you will transform the lives of other people and enlarge your income in the process.

    Jaiz bank

    The beautiful thing about being a value connector or broker is that you don’t work alone. You work in partnership with reputable organizations and people that can increase your value and credibility. All you need to do is be the one that connects people who need help with the companies that can help them.

    Perhaps you are thinking to yourself where do I find these companies, how do I know which problems are high income-producing problems, how do I negotiate a reward for myself and how do I do all of these with my busy work schedule etc. The solution is to join a problem-solving platform.

    3. Join a problem-solving platform. 

    A problem-solving platform is a platform that exposes you to a diverse range of problem-solving opportunities that produce high income, help you build rich relationships, and develop high-income skills. This means that you don’t need to set anything up all by yourself. All you need to do is join a platform that has already set it up for you. So if you want a one-stop-shop for solving high-income problems, entering into value for value exchange relationships, or developing high-income skills our platform is the answer.

    Our Relationship Brokering platform is focused on helping people solve financial, investing, retirement, wealth, business, and relationship or networking problems. So, if you want to solve any of these problems for yourself. And want to help other people solve this kind of problem in exchange for cash. You can join our platform. However, you must qualify to be considered. To learn more, send an email to [email protected].


    About the author

    Grace Agada is the most sought-after Financial Planning expert in the country and is quoted frequently in leading Newspapers, magazines, and blogs. Grace is a Renowned Keynote Speaker, Author, and Column Contributor in Punch Newspaper, This Day Newspaper, Vanguard newspaper, Business Day Newspaper, Leadership Newspaper, The Tribune Newspaper, and Online Platforms like Nairametrics, Proshare, and Bellanaija. Grace is the Founder of “The University of Wealth” The author of “The Financial Freedom MBA Program”, “The Better Life in Retirement Planning Blueprint” and “The Wealthy Business Blueprint”. Grace is on a mission to shrink the middle class and populate the upper class. She has been featured on BBC Africa. Business Day TV. Inspiration FM. and inside Naijatv. And she consults for Numerous Top Organizations, Company Directors, CEOs, Senior Executives, and High-Income Professionals.

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