Unwise Spending Habits In Your 20s

3 Unwise Spending Habits in Your 20s
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The early 20s is often associated with the beginning of adulthood – a time of navigating responsibilities and gaining independence. It's an exhilarating time as you experience a sense of financial independence as you’re starting to earn money from your first job. With newfound freedom, it's natural to have high aspirations and spend on the things you've always desired.

While income plays a vital role in personal finance, success will rely on how you’re managing your money. It’s cliché, but it’s true and it’s the one aspect that you can take control of. If you want to prepare yourself for a greater financial future, you must first develop a good grasp of money management.

To get on track financially, start by avoiding these 3 pitfalls:

1. Living beyond your means

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Earning your first paycheck is undeniably liberating and thrilling. It sparks a desire to purchase all the things you’ve been eyeing, including that pair of sneakers everyone’s talking about. 

“The limited edition sneaker is finally out! I must get my hands on it” 
“I’d look so cool in those shoes”

Before we know it, we fall victim to lifestyle inflation, where we start spending more as our income increases.  

But here's the thing – aligning your lifestyle with your financial reality is what truly matters. It's easy to get caught up in comparing ourselves to others and feeling the pressure to keep up with their spending habits. However, that's one way to find ourselves in a financial mess.

Instead, take a moment to refocus on what truly counts – your own financial wellbeing. It's about taking a step back and consciously making choices that support your long-term goals.  
 

What you can do:

One effective way is to practise mindful spending by distinguishing between your wants and needs. Avoid making impulsive purchases and instead, give yourself time to reflect on the necessity of an item. By doing so, you can make more informed financial decisions and prioritise spending on essential items rather than indulging in unnecessary expenses.

Picture this: you’re in a store, eyeing a shiny new gadget or a stylish outfit. Before you make that purchase, take a moment to evaluate the necessity of the item, is it a “want” or a “need”? Ask yourself, “do I really need this, or is it just a fleeting desire?”. You’ll be surprised how many impulsive purchases you can dodge.


2. Overlooking the significance of budgeting

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Many young people often overlook the importance of budgeting and instead choose to spend their money freely and worry about their finances later.

Teenagers often succumb to the habit of unwise spending, which is worsened by the existence of a debt system, commonly referred to as "pay later." They are easily lured by the ability to purchase expensive designer items through instalment payments and unless their mindset shifts, they may find themselves trapped in debt, resulting in negative long-term consequences.

What you can do: 

However, creating and following a budget can be a smart idea. It allows you to plan and track your monthly expenses, minimise unnecessary spending, and work towards your financial goals more effectively.

If you're new to budgeting and prefer to organise your budget digitally, the Belanjawanku app by EPF stands out as a valuable tool. Not only it helps you categorise and track your monthly and annual expenses, it also serves as a practical reference and foundation for money management.

The app lets you choose how you want to track your spending. You can use the estimates from the Belanjawanku guide or the Rule of Thumb method (45/35/20 Rule) – whichever you prefer. This helps you compare your expenses to the recommended budget and understand your financial situation better. 

Packed with tips for improved personal financial management, Belanjawanku acts as a trusted companion, empowering you to make informed choices about your finances. The app is available for download on the Apple App StoreGoogle Play Store and Huawei App Gallery


3. Ignoring the need to prioritise savings

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In addition to saving for retirement, it's essential to establish a solid emergency fund to safeguard your financial stability in unforeseen circumstances. While retirement might seem too far off to start considering, cultivating a habit of responsible savings is crucial for navigating the unexpected twists and turns that life can throw your way. Whether it's 3%, 5%, or 10% of your salary – allocating a dedicated portion for savings should be a non-negotiable initiative in your budget that can shield you from the impact of unexpected medical expenses, job loss, or other unexpected financial burdens.

Let's dive into the 45/35/20 Rule of Thumb as recommended in the Belanjawanku app , an easy trick to handle your money like a pro! Here's how it works: split your take-home pay into three parts - 45% for your necessities, 35% for your commitments, and 20% for your savings. Even if you can only save 5% at first, it's a great start that sets you on the right track. 

Remember, any amount greater than zero is a step in the right direction. Even if you can only contribute a small percentage initially, don't be disheartened. Starting early and consistently is key, and as your financial circumstances improve, you can gradually increase your savings contribution. 

 

What you can do: 

Consider opening separate savings accounts dedicated to your specific savings goals. Make use of automation features to schedule regular transfers into these accounts. By doing so, you create a reliable backup plan and witness your savings grow steadily, providing you with a sense of security and peace of mind as your savings accumulate over time.  

Additionally, you can easily contribute voluntarily  to your EPF account through the Voluntary Contribution feature, which grants you the flexibility to boost your savings. This empowers you to proactively bolster your savings, even with contributions as little as RM10! It's a fantastic opportunity to take control of your financial future and watch your savings flourish.


With a chance to make wise financial decisions, it's crucial to start afresh by saving and creating a budget. This approach will avoid unnecessary spending habits and ensure that you have savings for future needs. So, why not start now? Take control of your finances and begin saving today for a more secure tomorrow!