You’re young, you’re independent, you’re enjoying your own place—and you’re making decisions every day that impact your financial future, whether you’re aware of them or not.  Many young renters find themselves in tough circumstances simply because they didn’t think enough about their finances.  Be aware of these five common mistakes and you’ll be off to a strong start!

Money Mistake #1: Ignoring the Numbers

Very few people intentionally spend their rent money on a great dinner party or a new electronic device.  Unfortunately, many unwittingly find themselves short on cash for the essentials, because they haven’t taken a hard look at the numbers before making a purchase.  The fact that there’s money in your checking account today doesn’t necessarily mean you can afford that new pair of shoes.  Making sound financial decisions requires an awareness of your financial situation.  That means not only keeping a close eye on your bank balance and noting where your money is going, but also knowing up front how much money you have to spare for non-essentials each week or month.  Don’t start thinking about those new household items—or even your daily latte—until you’ve budgeted for bills and your regular savings deposit.  If you can’t afford what you want right now, don’t despair.  You’re just getting started and good planning now will give you greater financial freedom later.

Money Mistake #2: Rolling the Dice

Too many people in the early stages of a career assume things will only get better.  Why scrimp to save now, when in just a few years, you’ll have a much more comfortable income?  But, the unexpected does happen, whether that means a major car repair or a period of unemployment.  Your real life path will almost certainly have bumps that don’t match the trajectory in your mind.  Protect your present and future lifestyle with two savings plans.  First, build your emergency fund.  Experts recommend socking away enough money to live on for three to six months.  But, don’t stop there.  Though your income will likely increase as you progress in your career, your expenses will likely expand to match.  Give the money you invest today time to grow, meaning greater long-term value to you than money you put away 10 years down the road.  Get in the habit of long-term saving now, rather than waiting until you feel like you have money to spare.

Money Mistake #3: Digging into Debt

In a sense, the debt pitfall is nothing more than a combination of the first two mistakes.  Living beyond your means or failing to prepare for emergencies often means living on credit.  Whether you just can’t wait to pick up the latest tablet or you end up financing a much-needed car repair, the impact is the same.  Going into debt is an expensive way to keep your household moving forward, and one that puts you in an even more vulnerable position.  Debt increases your monthly bills and ensures that you’ll pay more for your purchases than you would have if you’d paid cash.  Fortunately, if you live within your means and build that emergency fund, you shouldn’t feel pressed to take on debt you might regret later.

Money Mistake #4: Living Like There’s No Tomorrow

We’ve talked about building your emergency fund already, but what about those long-term expenses that aren’t emergencies?  Whether it’s purchasing a home, sending the kids to college or supporting yourself in retirement, there are some big expenses in your future.  The sooner you start preparing for those, the better.  Money you put into an investment account like a 401(k) or Roth IRA, will have much more long-term value than the same amount of money deposited five years from now.  The growth potential of your investments diminishes as the clock ticks toward your retirement date.  If your employer matches your 401(k) contributions and you’re not taking advantage of that, you’re literally saying no to free money.  Take full advantage of those savings opportunities from the beginning; you’ll probably be surprised by how little you miss the non-taxable contributions withheld from your paycheck and how quickly your investments grow.

Money Mistake #5: Leaving Security to Chance

No matter how careful you are, some aspects of life are outside of your control.  That’s why it’s important to do what you can to protect yourself and those who depend on you from the consequences of unexpected events.  One item the young and healthy often neglect is life insurance.  Yes, the odds are in your favor, but term life insurance is inexpensive and will provide the bridge your family needs if the worst should happen.  Likewise, renter’s insurance might seem like an unnecessary expense, but in the event of a burglary or a fire, it can be essential.  Depending on your location, the value of your personal property and the security and condition of your building, you may be able to obtain a good renter’s insurance policy for as little as $10-20/month.  More and more often renter’s insurance is becoming part of the leasing agreement.

The bottom line:  look ahead. Though it may seem as if you have all the time in the world to make and save money, the truth is you never know when an unexpected expense will demand you have ready cash on hand.  A little dose of realism and a bit of advanced planning can help ensure your financial future is crisis-free.

Source- http://living.apartments.com/money/the-5-biggest-financial-mistakes-people-make-before-35/