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Your 20s are when you can make or break your financial habits. Avoid these financial mistakes and set yourself up for financial freedom!

Your 20s can be the most life-changing years of your life. It’s when you’re likely to develop habits (good or bad) and start making some serious career choices. There’s a few mistakes I’ve already made and there’s several things I’ve learned from other people’s mistakes.

Avoid these 8 mistakes to lead a healthy financial life, which will also help in many other areas of your life!

1. Taking out unnecessary student loans

If I could rewind time I would probably go back and cut those students loans AT LEAST in half. At the time, it felt like the necessary thing for me to do in order to survive. I took out extra loans so I would have a nice “cushion” each semester to pay for the house I live in with my sister, groceries, pay bills, etc. However, looking back I spent A LOT of unnecessary money (with money that wasn’t really even mine). During my college career I worked 4 years of the 5 I attended.

Not to mention my Master’s tuition was paid for and I received a monthly stipend for teaching AND I had a second job. I still had to pay the university fees each semester (a little over $1,000/semester), but I would take out thousands in loans. If I only took out what was necessary for just my Master’s that would have prevented close to $20,000 of debt. Oh well, you live and you learn. BUT learn from me and DON’T DO IT!!!

2. Co-signing on a car/anything

Something I strongly believe now is that you can’t trust anyone 100%, especially when it comes to money. Allowing someone to use my credit/name to purchase a car is probably one of the biggest mistakes of my life thus far. I’m still dealing with this issue and had to take legal action. Everything has worked out now, but seriously just don’t do it.

I don’t care if you love that person. I don’t care if you trust that person with your life. I don’t care if they have money or not, just don’t do it. The only time I would justify this is if you’re co-signing on your child’s car but you’re probably not doing that in your 20s anyway.

I will never make this mistake again.

3. Not contributing to a retirement account

You’re in your 20s, there’s no need for you to start contributing to a retirement account right? Wrong. Take advantage of your age and start contributing to a Roth IRA or something similar. These accounts increase over the years due to compounding interest, if you start now you’ll contribute less overall but make more money compared to someone starting in their 40s.

Look at these comparisons:















The chart on the left shows the difference between investing for only 7 years early on in life vs. starting to invest 8 years later. You have to contribute more money for many more years and still end up with LESS. Similar idea with the chart on the right. Now imagine if you maxed out your account every year?! The pay-off is incredible.

Start now. It will definitely be worth it.

4. Not investing in yourself

In multiple areas of your life.

Your physical health. Which you can invest in by consuming primarily whole, healthy foods and exercising regularly.

Your mental health. Which you can invest in by meditating, talking things out, thinking positively, etc.

Your knowledge. Which you can invest in by reading books/blogs, learning new things, and by taking courses/getting certifications or degrees.

Your career. Which you can invest in by developing new skills, forming relationships, working hard, etc.

You should be dedicating time to each of these areas in your life throughout the week, some more than others. It’s also important to invest in these areas  because it will prevent medical bills and help you grow financially depending on your goals.

5. Not making extra income when possible

We’re young. We have more energy (well more than we will), less obligations, and less responsibilities. If you’re not picking up extra shifts or side-hustling, you’re missing out on some great opportunities. Yes, it sucks to work an extra day but even if you only bring in $100 extra that month think of what you can do with that!

Hell, even an extra $50 helps! That’ll fill your gas tank twice, that’s groceries for a week, that’s a gift for a loved one, that’s money to be saved, that’s more money toward your debt, that’s 2 nights out, that’s your phone bill…I could make this list a book long.

My dad works 70+ hours a week at 2 jobs and he’s in his 50s.

I’m not saying it’s necessary to work 2 jobs, but take advantage of the internet and all the possible side-hustles you can start today. Oh! And pick up those extra shifts!! I sure love overtime on my paycheck!

6. Not having an emergency fund

Start developing healthy money habits while you’re young. Most adults (even past their 20s) don’t even have $1,000 saved up. This leads to overuse of credits cards and a never-ending cycle of debt repayment. You should definitely aim to save more than $1,000 but it’s a good balance to constantly have. Most people can’t save money, not that they don’t have the money for it, they don’t have the discipline for it.

Try using an app like Qapital which automatically saves money for you and you can withdraw from it if necessary. It’s FREE and if you sign up and start saving toward your goal using this link we’ll both get $5!!

7. Renting instead of purchasing a home

I know many people who can afford a home yet pay way too much money to live in an apartment. I can understand wanting to rent if you don’t think you’ll live in the area over a year or if you’re in between homes or something, but if you can afford to buy a house you definitely should.

With a median income and a decent credit score, you can definitely purchase a home.

A house is an investment. If you pay rent every single month, you still have nothing to call yours even after 3 years. It’s still the complexes apartment and/or the landlords house. If you own a home and eventually may off the mortgage, you can sell the house for profit OR rent it out yourself for extra income!

A house is typically a cheaper monthly payment. Apartment rent is absurdly high these days and it’s just cash gone. Depending on the house you buy, your mortgage will more than likely cost a lot less!

You have a house! No annoying neighbors upstairs stomping around, no pet fees, and no more cold showers.

Sure, having a house comes with more responsibility but it’s a very important and valuable investment. Read more about purchasing a home in your early 20s here!

8. Wasting money on food/unnecessary spending

I honestly can’t believe how much my peers spend on eating out. I rarely go out to eat…MAYBE once a month and I’ve significantly decreased money spent on food out since starting my debt pay-off journey. I’ve meal prepped my meals nearly every single week for almost 2 years. It’s healthier and it’s cheaper. While fast food is convenient and fairly cheap, you’re taking a toll on your body and every dollar adds up. Create a grocery list, go grocery shopping, cook your food, and repeat. Develop this habit.

Clothes, shoes, and other accessories seems to be another area where a lot of young people spend way too much money. I, myself have been guilty of this in the past. I have a closet full of clothes that I hardly ever wear or that I no longer like. I think because of social media, we’re easily influenced into buying more things to fit in or impress other people. While I do sometimes love shopping or getting new shoes, my perspective has shifted a ton recently. I don’t really care to have so much stuff and my bank account thanks me for that!

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2 thoughts on “8 Financial Mistakes to Avoid in Your 20s

  1. Love this post. Forwarded to my 21 yr old son.

    Posted on March 20, 2018 at 6:13 pm
    1. Thank you so much! That’s awesome!! Hopefully he finds it useful! 🙂

      Posted on March 22, 2018 at 2:48 pm