By Matt Busse

I don’t know what it is about people in their twenties these days. A frighteningly high number of us are simply terrible about managing our personal finances. Why is that? To hear our parents and grandparents tell it, when they were young, they grew their own tomatoes, made their own clothes, and bought their first cars for fifty bucks each, all while fighting wars on the other side of the world. By contrast, I know people my age who can’t even balance a checkbook, let alone grow a proper vegetable.

Worst of all, there are a handful of mistakes many, many twentysomethings make when it comes to personal finance. You can trust me on this, because I have personally made all of these errors–some of them multiple times–so I know what I’m talking about. In no particular order, here are five common personal finance mistakes to avoid if you’re in your twenties, plus tips on how to steer clear of them.

1. Using credit cards. Scott Adams, creator of the “Dilbert” comic strip, says credit cards are the crack-cocaine of the financial world. He’s right. They trick you into ignoring how much you spend and pushing into the back of your mind the fact that you will, eventually, have to pay them off. And once you’ve received your first card, the sharks start circling. Other companies send you offers. They seem tempting. Zero percent interest for a year, one says. So you transfer your balance to that card instead of paying it off. Then you do it again with another card a month later. Soon, you’re playing hot potato, opening up one line of credit after another, racking up charges and flushing your credit score down the toilet.
   Solution: Use a debit card or cash for your purchases. If you absolutely must use a credit card, get a low-interest card and use it only when needed. Pay off your balance on time.
2. Buying the latest and greatest. Why are some twentysomethings obsessed with always having the flashiest cell phone, the biggest television, the fastest computer? It’s an image problem, a consumption problem, and it’s a big waste of money. If you like luxury items, and you have the money in your budget to get them, that’s fantastic. Enjoy. Have a blast. But don’t do it just to have the hottest new thing. And don’t do it if you have more pressing expenses at hand, like paying off student loans or saving for your first house. Solution: Be satisfied with what you have. If you want something new and cool, make sure you can really afford it.
3. Financing items that depreciate in value. This goes hand in hand with the previous item. That 52-inch television might look nice in your living room, but will it still seem as cool when you’re paying for it four years down the road? Even worse, four years from now, it’ll be worth only a small fraction of what you paid for it. Getting financing on big-ticket items can sometimes be considered necessary if it’s a washing machine or other appliance you would call a “need.” But for big-screen televisions, booming car stereos and other frivolous items, it’s just not worth it. You should only finance things that gain value over time. That includes not financing cars, if you can afford to always buy used.
   Solution: Save up your money instead and pay for what you want upfront. That way, not only can you avoid interest, but the extra time it takes to save up for a pricey item will force you to really think about whether you want to spend the money on it.
4. Ignoring your 401(k). If your company offers a 401(k) retirement plan with a matching contribution, take advantage of it. Max out your investment to match the company’s contribution (in other words, if your employer matches up to four percent, you should put in four percent). It’s like free money from your boss. And you’re never too young to start thinking about retirement.
   Solution: Max out that 401(k)! Don’t touch it until you retire. You’ll be glad you did.
5. Refusing to learn how to budget. I know a number of people in their twenties who just don’t want to learn how to keep a simple personal budget. They say it’s too hard, or it takes too much time and work. That’s ridiculous. There are a slew of books and websites available that can teach anyone to make an easy, low-maintenance budget using a computer spreadsheet. All it takes is a few minutes a day, or a little longer if you update it every week. If you learn to allot your money to different bills and expenses, track your purchases and save your extra cash, you’ll be much better off in the long run for it.
   Solution: Suck it up and learn. Go to Google and type in “learn personal budgeting.” It’s not difficult, and it’s definitely worth your time.

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Matt Busse is a journalist and freelance writer living in Lynchburg, Virginia. Since 2004, he has covered business, technology and government for Lynchburg’s daily newspaper, The News & Advance. He writes a
blog about writing at mattbusse.com.