5 More Financial Mistakes to Avoid In Your 20s

There are many financial mistakes to avoid in your 20s. The problem is, most people don't realize what they are. Learn from someone who's been there!

A few weeks ago, I wrote a post on common financial mistakes to avoid in your 20s. As I was writing it, I realized I had a lot more to say on the subject!

I truly believe learning how to manage your money early on in life will pay you dividends later on. The sooner you can prioritize, the sooner you can figure out a way to reach your goals.

Unfortunately, due to a horrible lack of financial literacy, too many people enter their 20s, and adulthood, in confusion. I see way too many of my peers living paycheck to paycheck, and it needs to stop.

If you don’t develop good financial habits in your 20s, you’ll simply keep the habits that got you into the financial situation you’re in. That’s probably not going to allow you to reach any financial goals you might have.

Let’s turn that around by taking a look at five additional financial mistakes to avoid in your 20s. Learning what to do now will hopefully make your life a little easier later on!

1) Don’t Fall For the “YOLO” Mentality


It pained me to type that out, but it’s something that needs to be addressed, especially among millennials.

A lot of us graduate from college feeling like we’re ready to take on the world. When we get a “real job,” we feel like anything is possible because we’re finally earning something.

We feel free. We no longer have to keep telling ourselves and our friends “no” because we can afford to go out and have fun.

You only live once, right? Might as well live life up to the fullest.

However, when you couple that with “fear of missing out,” you have a deadly combination. There’s a lot of potential for overspending.

I get it – I do. No one wants to say, “It’s not in the budget this month,” and risk looking like a weirdo. (Even though caring about your money and how you’re spending it is great!)

It’s also not fun to look at your social media feeds the day after and realize what you missed out on.

However, we only have so much money to spend on things. We need to find a balance between spending, saving, and paying off debt (if we have any). That balance can be found, and there’s no way to make it to every single event you get invited to anyway.

Relax, and stop stressing about it. Spend time with people in meaningful ways according to your values, and budget for it beforehand.

2) Avoiding the Stock Market


I had mentioned delaying saving for retirement as one of the financial mistakes to avoid in your 20s in my last post, but I want to add to it by talking about investing in general.

Those in their 20s and 30s who saw the effects the recession of 2008 had on family and friends were a bit more than scarred from the ordeal. It’s tough to think investing in the stock market is such a good idea after everything that went down.

However, the truth is you can’t get ahead without some “help” from the market. Your wealth needs to be growing to keep pace with inflation. If you keep your money in a bank account that’s not going to happen. Your returns will be as good as non-existent.

Not sure how inflation works? In simple terms, inflation erodes the value of currency over time. Things were so much cheaper back in the day because the price of goods has increased steadily over the years. Prices are only going to continue rising, meaning your dollars will have less purchasing power in the future.

Sure, the stock market can seem intimidating, but it’s nothing a little financial education can’t help you with.

Seriously! There are so many free, awesome resources out there that can help you understand what you’re doing. John’s written a few guides about it here as well. The good thing is, you’re young, and you’ll be able to weather the ups and downs of the market. Making mistakes early on is much better than making them when you’re close to retirement.

If you don’t have enough time to read up on everything and you have a decent amount to invest, consider hiring a financial advisor to help you be successful.

3) Being Too “Busy” To Budget / Track Spending


Unless you’re absolutely sure you have an amazing handle on your spending and where your money is going, you need a plan. You also need to check in with your financial accounts on a regular basis to know what’s going on.

Getting a spending plan together doesn’t have to be difficult, either. Tools like, You Need a Budget, and Personal Capital automate most of it for you and in some cases are entirely free! You just need to keep an eye on things and go through the initial setup. It’s well worth it.

There’s really no excuse to avoid managing your money. Being “busy” doesn’t count. Set your financial goals up in one of these apps, and you can receive alerts if you spend over a set amount, or reach a savings goal.

Budgeting doesn’t have to be a horrible, restrictive process. Nor does it have to exclusively take place within a spreadsheet. Make it work for you.

4) Not Having Any Financial Goals


Those in their 20s enter the real world with little knowledge about money management. This can lead to wandering aimlessly in circles with money.

If you have no financial goals, your money will likely fall through the cracks. You won’t care about it as much because it doesn’t really serve a specific purpose, other than to buy stuff.

Your money will go a lot further if you designate a goal for it.

Saving money just for the sake of saving doesn’t usually work. At least, it works far less than saying you want to save $1,000 within six months to be able to go on an awesome trip overseas.

The same can apply to debt. Figuring out what your debt freedom date is can motivate you to work harder toward paying it off because you have a timeline to work with.

There are many financial mistakes to avoid in your 20s. The problem is, most people don't realize what they are. Learn from someone who's been there!

5) Thinking Credit Cards = Free Money


Lastly, when it comes to financial mistakes to avoid in your 20s, I need to mention proper credit card usage. Many people in general think credit cards are basically free money, when they’re the furthest thing from it.

The concept might seem weird at first. This institution wants to give you a card, usually for free, and you can use it to buy stuff even if you don’t have the money for it. This sounds great, until you find out about how credit card companies make money.

You shouldn’t live off of credit cards, and realistically, you can’t sustain it.

Say you just have to have a new $150 gadget. You don’t have the money, so you put it on credit. Since you can’t afford to pay it off right away, it’s not going to cost you $150 anymore.

If you carry a balance, interest will start to accrue. You’re actually paying around $170 once interest (at 15% APR) is factored in. Oops!

Learn Early


I hope these mistakes have been helpful to review. Truthfully, they’re all fairly easy to avoid when you’re mindful of them. The issue is, most people in their 20s aren’t mindful of their financial habits. If you’re already reading financial blogs, you’re well on your way to learning early and avoiding these costly mistakes.


Are you guilty of making any of these financial mistakes? Did it take you a while to learn from them, or did you learn how to manage your money early on? What’s the biggest financial mistake you made in your 20s that you regret?

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Erin M. is a personal finance freelance writer passionate about helping others take control over their financial situation. She shares her thoughts on money on her blog Journey to Saving.


  • It took me over 20 years to get my financial act together, there is no do over for me, just forward progress, but my children we learn a lot from my mistakes.

  • Great tips! It’s easy to think a credit card is a tool to buy things you (probably don’t) need. I racked up my share of credit card debt in my 20s and just finished paying it off. Good financial habits are so important to develop when you are young!

    • Erin says:

      Congrats on paying off your debt! Credit cards are so tricky when you’re younger and have limited resources. It’s very easy to fall into the trap of charging things when your paycheck isn’t coming for another few days.

  • I’m totally guilty about being busy to track my income and spending. Hopefully starting next month, I will carefully track my budget.

    • Erin says:

      I think it happens to just about everyone! That’s why I always recommend using a tool or an app – it might not be *as* beneficial (especially if you don’t look at it often), but it’s better than being completely in the dark.

  • I think #1 is spot on. In this generation, it’s easy to be bombarded & tempted by social media displaying images of glamorous vacations, extravagant events, and new material items continuously. It can be challenging & takes serious discipline to keep your spending/saving goals aligned! Finding the balance is key like you brought forward. If you are pre-planning & saving in advanced for such events, you won’t have to rely on credit or find yourself in a tough financial situation to do things you value. Great post!

    • Erin says:

      Thanks Alyssa, so glad you enjoyed it! It can be really difficult to say “no” when we’re getting hit with so many messages telling us to say “yes,” or instilling some sort of fear in us that we’re missing out. Having your financial priorities straight makes it a lot easier to know what’s truly important, and what isn’t.

  • Money Beagle says:

    I think that when you’re in your 20’s, one of the best ways to gain good financial knowledge is to find people who are older (30’s, 40’s, 50’s) and have financial stability, and talk to them about their experiences.

    • Erin says:

      Yes! It never hurts to ask for advice, provided they’re financially responsible themselves. =) I think a close friend or family member telling you what you should be doing hits home a little harder, too.

  • Hannah says:

    I think the YOLO tip is a great one, and not just financially. I think that YOLO is too often used as an excuse to live a shallow, meaningless life. If we took more time to think about the things that really matter, and concentrated our life there, the money would more easily follow our priorities. When you’re a mile wide and an inch deep, there are too many spending priorities, and then we get in a pinch.

    • Erin says:

      Totally agree, Hannah. It’s all about getting clear on what WE want and what OUR values are – not what other people’s are. Going with the flow can be a good thing (coming from someone who’s pretty Type A and trying to relax more =)), but not when it’s mindless.

  • Jason B says:

    The “yolo” phenomenon has set a lot of folks back. I know way too many people who think like that. I had to separate myself from them because I knew that wasn’t the way to go.

    • Erin says:

      Good for you, Jason! It’s really tough to break out of that mentality when you’re surrounded by it. That’s why I’m so grateful my friends aren’t like that!

  • Great list Erin!!! I definitely had the YOLO attitude (before it was a thing) in my 20s and I am paying for it now. I also never set specific goals for myself because I just assumed I would work forever and always make a certain amount of income. If I had definitive goals, I think I would have been better about building my wealth rather than spending it.

    • Erin says:

      I think that’s an interesting assumption – that you’ll just be working forever, and you’ll (probably) always have money coming in. Breaking even kind of seems okay when you look at it like that. Realizing financial independence is possible turns that completely upside down!

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