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The 5 Biggest Money Mistakes to Avoid in Your 20s – That I’ve Done!

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Being in your 20s is a wild time. You start to truly grow into yourself and get your first taste of adulthood. With this comes plenty of mistakes!


Although I’m only 28, I’ve had my fair share of “learning experiences” especially when it came to my finances. In this post, I’m breaking down the 5 biggest money mistakes to avoid in your 20s that I’ve personally done!


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5 money mistakes to avoid in your 20s

Financing a car you can’t afford

Personally, this was the HUGEST money mistake I’ve made to date. An auto loan was my first ever debt and I failed to properly educate myself before signing on the dotted line.


When you have no credit, know nothing about interest rates, and have $0 saved for a down payment, it’s easy to be finessed into a high-interest loan. Car salesmen can smell an amateur from a mile away, and if you don’t do your research before stepping foot on a car lot then any deal sounds like a good deal.


Have you ever heard advertisements in which the person is shouting:

“No credit? Bad credit? We’ll still put you in a car!”

“You don’t need a job, just bring a driver’s license!”


Sounds like a great deal right? But let’s break it down:

“No credit? Bad credit? We’ll still put you in a car!”

Your credit shows lenders the likeliness of you repaying what you’ve borrowed. And sorry to say, but no credit can be just as bad as bad credit. If a lender sees that you have a low score or there is no score to help them gauge what type of borrower you are then you’re getting slapped with a denial or an interest rate so high it will be hell to get the principal balance to move.


Needless to say, educate yourself before going to a car lot. Before signing, look at:

  • The amount of your payments.
  • Your interest rate.
  • Your term.


You must understand how your interest rate is going to affect how much of your payment goes to your principal balance and how much will go to interest charges.


To break it down a bit further, let’s say that you get a car priced at $28,000. Your interest rate is 9% and you have a 60-month term or 5 years. This would make your monthly payments roughly $580 and you will pay out nearly $7,000 in interest charges alone!


As far as your payment goes, if you cannot afford to make twice the amount per month then most likely you cannot truly afford it. If possible, buy a cash car. New cars depreciate quickly fast and paying thousands for a car that is worth less than what you owe is just not worth it.

Related reading: 5 Simple Steps to Refinance Your Car Loan. And Pay it Off Faster!


Not caring to save money!

According to Business Insider, younger Americans don’t have enough cash on hand for emergencies. Those in their 20s have the least amount saved compared to other age groups, and I know for sure this was not a priority of mine. Because of that, I would often have to use a credit card to pay for pop-up expenses.


So, I would pay my bills, pay for wants, and then whatever was leftover (which wasn’t much if anything) I would toss to savings. And 85% of the time I would wind up withdrawing the money right back out!


Saving money is a form of self-care. You are protecting your future self by increasing financial security so make it a point to pay yourself first. This will give you a safety net to fall back on during hard times, help you build wealth, and give you peace of mind.


If you don’t have an emergency fund with at least one month of your living expenses put back, I recommend focusing on increasing your savings to that number and working your way up to six months’ worth.


To help you establish a habit of saving money, I developed a free money-saving course for you here!

Using the “I deserve it” excuse

In today’s society, we tend to want to buy what we feel we’re worth in material things versus increasing our net worth. And to escape that dreaded buyer’s remorse we use the “I deserve it” line to justify our purchases.


This is one of the money mistakes you have to consciously avoid in your 20s or it will get you in a lot of trouble!


I thought that because I worked hard I deserved everything that I wanted. No lie, I would whisper to myself “I work hard so I deserve it.”


In reality, what I was saying was that I deserved to be in credit card debt because I couldn’t afford a lot of the things I purchased!


If you cannot afford something, as in you cannot comfortably make a purchase and have plenty of money left over to take care of your other financial obligations, then you don’t deserve it.


This line is an excuse we use to buy things without guilt and you have to shift out of that toxic way of thinking by exercising patience. You must believe that you deserve something better than just material things.


Don’t worry about the Joneses, because they’re not the ones paying your bills.


Posts to check out next!

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5 Telltale Signs That Your Budget is Failing! + How to Fix It!


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7 Effortless Ways to Save Money on Clothes – And Save Thousands!


7 Best Online High-Yield Savings Accounts to Consider for 2020


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Building an Emergency Fund – Save Your First $1,000 Fast!


Not participating in your employer’s 401(k)

I’ll admit that all of the talks about 401(k)s sounded like a foreign language to me! And when you’re young, it’s easy to dismiss saving for retirement because you feel like you have plenty of time. However, the earlier you start the better.


Many of those in their 20s are just now stepping into the corporate world, making more than they were in the positions they held previously. You may feel like you’re finally rolling in dough, and taking a look at how much will be taken from your pay may tempt you to say uh uh honey!


I let this deter me from participating, but opting out causes you to have to save more down the road just to reach your retirement savings goal. How? Because the earlier you save the more time your contributions have to grow. This means that you can reach your goal with smaller investments.


Opting out also means you’re leaving free money on the table. This is because many employers offer what’s called an employer match, which is when an employer matches a certain percentage of your contributions. The amount differs but is typically a 50-100 percent match when you are contributing a certain percentage.


No one wants to be forced to get a job as an elder, so out of all the money mistakes to avoid in your 20s be sure this one sticks! To learn more about retirement savings, read: What is a 401k Plan? – How it Works (for the Utterly Confused!)


Taking out more student loans than needed

School refund time felt like Christmas to all college students I’m sure. It’s difficult to hold down a full-time job while trying to focus on your studies so these large sums of money were a huge financial relief…at the time!


To make sure I got as much back as I could I accepted the maximum amount of student loans. It’s easy to get distracted by the idea of refund money, but scratching beneath the surface it wasn’t the smartest move.


Accepting more than what’s needed means you’re signing up to pay extra after interest charges are added in. And if you haven’t heard, the student loan interest is a beast.


Ideally, you wouldn’t take out any student loans but I know for many students that isn’t an option. Only accept the amount you will need to cover your tuition and books after any financial aid is applied.


This way, you’ll graduate with only the debt that was necessary to attain your degree which will make paying back your debt a lot easier mentally because you know you did everything in your power to keep the amount low.

 Related reading: Pay off Student Loans Fast! – On Any Income


Final words

Experience is the best teacher, but knowing these 5 money mistakes to avoid in your 20s will help you save money and avoid going into debt before you hit your 30s!

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