How to Avoid Common Money Mistakes in Your 20

Key Takeaways

  • Begin building good financial habits in your 20s to lay a strong foundation for your future.

  • Create and stick to a budget to understand your spending and avoid debt.

  • Save for emergencies, invest early, and leverage employer benefits to secure your financial well-being.


Your 20s are a crucial time for building the foundation of your financial future. It’s a decade filled with new experiences, independence, and, often, a fair share of mistakes. Making smart financial decisions now can set you up for success in the decades to come. With a little planning and discipline, you can navigate this formative period with confidence and stability. This article explores a few common money mistakes in your 20s and how to avoid them.

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Financial Missteps in Your 20s

Not Having a Budget

One of the biggest mistakes is not having a budget. It’s easy to lose track of your spending when you don’t have a plan. A budget helps you understand where your money is going and ensures you’re not spending more than you earn. Start by listing your income and expenses. Use budgeting apps or a simple spreadsheet to keep track. Stick to your budget and adjust as necessary to stay on track.

Ignoring Student Loans

Many 20-somethings ignore their student loans, hoping they’ll somehow disappear. Unfortunately, they won’t. Ignoring them only makes things worse. Make a plan to pay off your student loans as soon as possible. Consider setting up automatic payments to ensure you never miss a due date. If you’re struggling, look into income-driven repayment plans or refinancing options.

Relying Too Much on Credit Cards

Credit cards can be convenient, but relying on them too much can lead to debt. It’s easy to swipe now and worry later, but that’s a dangerous habit. Use credit cards responsibly. Pay off the balance each month to avoid interest charges. If you can’t trust yourself with a credit card, stick to debit cards or cash. This way, you can control your spending and avoid accumulating unnecessary debt.

Not Saving for Emergencies

Life is unpredictable. Not having an emergency fund can turn a minor inconvenience into a major financial crisis. Aim to save at least three to six months’ worth of living expenses in an easily accessible account. Start small if you need to and build up over time. Your future self will thank you for being prepared when unexpected expenses arise.

Skipping Health Insurance

Skipping health insurance might seem like a good way to save money, but it’s a risky move. Medical bills can quickly become overwhelming without insurance. Take advantage of employer-sponsored plans if available. If not, look into individual plans through the health insurance marketplace. Investing in health insurance now can save you from financial ruin in the event of a medical emergency.

Not Investing Early

Investing can be intimidating, especially if you’re new to it. However, the earlier you start, the more time your money has to grow. Take advantage of employer-sponsored retirement plans like 401(k)s, especially if they offer matching contributions. If your employer doesn’t offer a plan, consider opening an IRA. Start with small amounts and gradually increase your contributions. Over time, these investments have the potential to significantly enhance your financial security and future wealth.

Living Beyond Your Means

It’s tempting to keep up with friends who seem to have it all, but living beyond your means can lead to debt and financial stress. Be honest with yourself about what you can afford. Focus on your own financial goals rather than comparing yourself to others. Remember, social media often shows a highlight reel, not the full picture. Prioritize your financial well-being over trying to match others’ lifestyles, which might not be as perfect as they appear.

Neglecting to Build Credit

Building good credit is important for your financial future. A good credit score can help you get better rates on loans and credit cards, and it can even impact your ability to rent an apartment or get a job. Start by paying your bills on time and keeping your credit card balances low. If you don’t have credit, consider getting a secured credit card to start building your credit history.

Forgetting to Plan for Taxes

Taxes can be confusing, but ignoring them can lead to big problems. Make sure you understand your tax obligations, especially if you have multiple income sources or freelance work. Set aside money for taxes throughout the year so you’re not caught off guard when tax season arrives. Consider consulting a tax professional if you need help.

Not Seeking Financial Advice

Many young adults shy away from seeking financial advice because they think it’s only for the wealthy. However, getting advice early can help you avoid costly mistakes. Look for reputable financial advisors or use online resources to educate yourself about personal finance. Many advisors offer free consultations or lower-cost options for young clients.

Ignoring Retirement Savings

It’s easy to think that retirement is a long way off, but starting to save early can make a huge difference. Thanks to compound interest, even small contributions can grow significantly over time. Take advantage of any employer matches to your 401(k) plan and consider opening an IRA for additional savings.

Falling for Get-Rich-Quick Schemes

In your 20s, it’s tempting to fall for get-rich-quick schemes that promise easy money. Be cautious of any opportunity that seems too good to be true. Do thorough research before investing your money. Stick to proven investment strategies and avoid high-risk ventures. Remember, if something sounds too good to be true, it usually is, and you could end up losing more than you gain.

Neglecting Financial Education

Understanding personal finance is crucial for making informed decisions. Take the time to educate yourself about budgeting, investing, and saving. Read books, take online courses, or listen to podcasts on personal finance. The more you know, the better equipped you’ll be to handle your finances. Knowledge is power, and a solid financial education can help you avoid costly mistakes and build a secure future.

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Not Taking Advantage of Benefits

If you’re employed, make sure you’re taking full advantage of any benefits offered by your employer. This can include health insurance, retirement plans, and other perks like education reimbursement or wellness programs. These benefits can save you money and provide valuable resources. Don’t overlook these opportunities, as they can significantly enhance your financial stability and personal well-being.

Overlooking the Importance of Networking

Networking isn’t just about landing a job; it can also help you learn about financial opportunities and gain valuable advice. Connect with mentors, join professional organizations, and attend industry events. Networking can open doors to new opportunities and provide insights that can help you grow financially. Building a strong professional network can also introduce you to potential business partners or investment opportunities you might not have found otherwise.

Not Setting Financial Goals

Having clear financial goals can help you stay focused and motivated. Whether it’s saving for a house, paying off debt, or building an emergency fund, setting specific goals gives you something to work towards. Write down your goals and create a plan to achieve them. Once you have your goals defined, breaking them down into smaller, actionable steps can make them more achievable and manageable over time.

Ignoring Small Expenses

Small expenses can add up over time. It’s easy to overlook minor purchases, but they can eat into your budget. Track your spending to identify where your money is going. Cutting back on small, unnecessary expenses can free up money for savings and investments. Additionally, using budgeting tools or apps can help you stay on top of your spending habits and make more informed financial decisions.

Not Understanding Your Benefits Package

If you have a job with benefits, make sure you understand what’s available to you. This includes health insurance, retirement plans, and other perks. Take the time to review your benefits package and take full advantage of what’s offered. Maximizing these benefits can significantly enhance your financial well-being and provide additional security for the future.

Not Preparing for Major Purchases

Whether it’s buying a car or a house, major purchases require careful planning. Don’t rush into big financial decisions without doing your research. Understand the full cost, including maintenance and insurance, and make sure you can afford it without stretching your budget too thin. Additionally, consider saving for a substantial down payment to reduce long-term debt and secure better financing terms.

Neglecting to Save for Big Life Events

Life events like weddings, buying a home, or starting a family can be expensive. Start saving early for these milestones to avoid financial stress when they arrive. Set up a separate savings account for these big events and contribute regularly. Planning ahead and setting realistic savings goals can help you stay on track and ensure you have the necessary funds when these important life events occur.


Avoiding common money mistakes in your 20s can set you up for long-term financial success. Create a budget, stay on top of your student loans, use credit cards responsibly, and build an emergency fund. Invest early, live within your means, and continuously educate yourself about personal finance. By making smart financial decisions now, you’ll be well-prepared for the future. Remember, it’s never too early to start planning and saving for your financial goals. Your future self will thank you for the effort you put in today.

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Jeff Sekinger

Founder & CEO, Nurp LLC

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