How to Avoid Common Personal Finance Mistakes in your Twenties, and Build Wealth

Abstract

You can do three things with your income: spend it; save it; or, give it (to family, charity, church, etc.). Most people do some of all three, but different personality types make wildly different allocations between these choices, with wildly different outcomes. The choices you make in your twenties can have a dramatic impact on your financial future.

In only six pages, I discuss practical issues concerning budgeting, buying cars, life insurance, subscriptions, buy-now pay-later financing, retirement investing (how much to save and when to start), active investing versus passive investing, the impact of transaction costs, forced early retirement, legal tax avoidance, emergency funds, wills, credit cards versus debit cards, and survey evidence showing the steps that everyday people took to become millionaires.

Keywords: Personal Finance, Financial Literacy, Wealth, Budgeting, Risk, Return, Transaction Costs, Horizon, Inflation and Taxes

JEL Classification: D14, G11