5 Money Mistakes to Avoid in Your 20s
There are 5 major money mistakes to avoid in your 20s.
Because life is one big crazy adventure.
And along the way, Iâm sure youâve made your share of money mistakes. Your mistakes may not be the 5 money mistakes Iâm going to cover today.
But even if you donât want to admit it right now… thereâs at least one thing youâve done wrong with your money so far in your life.
And itâs nice to learn from the mistakes of others.
I know Iâve messed up in quite a few ways. And these mistakes are what got me thinking and writing. All 5 points are based upon money mistakes I actually made myself.
There are a lot more money mistakes to avoid in your 20s but these are the mistakes I made.
So without further delay, letâs dive right into it.
Money Mistakes to Avoid in Your 20s
Mistake #1) Going to College
Iâm sure after reading that headline you might have paused for a minute and said… wait what?
Did I read that right?
And yes you did! College is not right for everybody.
Itâs an old, out-of-date system that no longer holds the value it once did.
Our current educational system teaches most students college is the next step after high school.
Parents, mentors, teachers, and society all play a role in the development of each and every young adult.
As we grow up, everything in our world tells us going to college is whatâs best for us. And because of this influence, a lot of young adults will feel the pressure as they have to make this life-changing decision.
They must each decide, whatâs next?
A decision they might not even be ready to make.
A decision that could keep them in debt for a significant amount of time into their adulthood.
This happens especially when students are not well informed or donât fully understand what theyâre getting themselves into by enrolling in college.
Going to college for the wrong reasons tops the list of money mistakes to avoid in your 20s.
Many will even drop out before receiving that oh-so coveted piece of paper.
A paper that states you have satisfied their requirements and are now âeducated.â If youâre interested, hereâs some more info on drop-out rates.
Many will graduate only to go back home (probably with mom & dad) or settle down and work a minimum wage job right after graduating. I know quite a few who have gone through this, maybe this is you, or maybe you know someone in this boat.
And although college can be a fantastic place to learn and grow, itâs sad…
Because in reality, you donât need a piece of paper or the approval of anyone to be educated.
University and colleges are businesses.
They need you, the student, to operate.
They thrive off of YOUR money that supposedly goes towards âtuitionâ and your hunger for knowledge.
However, knowledge is often cheap and in many instances, free.
In fact, youâve got more knowledge than you could ever consume in a lifetime in your pocket if you have a smartphone on you.
This is why going to college just isnât for everyone. It’s a huge money mistake. And itâs definitely one of the money mistakes to avoid in your 20s.
Itâs only right for you if youâve thoroughly thought it out. You know EXACTLY what it is you want to do and get out of it. Doing some research beforehand never hurts. But if you really want to major in something, just do it!
Just have a plan in place so you can graduate on time while spending the least amount of money possible.
I did not do enough research which is why I made this money mistake myself.
I didn’t think my major through and going into my sophomore year at the University of Connecticut I was lost and I had no idea what I wanted to do.
And I came in as a Pre-Pharmacy student (even though I sucked at math and chemistry). Then I tried switching to nursing but the program and school of nursing had limited enrollment seats.
So I ended up having to switch and I became a Health Science major.
Keep in mind that I was paying a ton in tuition every year while trying to figure out what I really wanted to do.
Even with so many things going wrong, I did manage to do one thing right.
I joined the Air Force R.O.T.C. program on campus and worked my ass off to secure a job after graduating.
Serving and joining was something I thoroughly thought through. It was on my mind for quite some time.
Anywho, I now believe you should only go to college if you want to be a doctor, lawyer, nurse, or anything technical. Something where you need a piece of paper that states you are certified.
But if itâs not something that requires a 4-year-degree certification, you have options. You can:
- Learn on your own.
- Keep more money in your pocket by going to a community college.
- Shadow someone and gain some real-world experience.
- Learn a trade or skill that costs way less than a degree. Certain trades even pay as much if not more than certain degrees (ex. Electricians, Construction, HVAC). And when youâre done, youâd be in demand right away.
- Invest in online courses that teach you exactly what you need to know for what you are going to do.
- Wait a few years until youâve figured out what you want to do before getting a degree youâre not going to use. Give yourself permission to take some time off. Grow and discover what it is you really want to do and then when ready, go back when YOU feel like it.
Do it your way. Not how everyone else wants you to do it.
I myself have learned more (real-world practical knowledge, which I use daily) on my own since graduating than I ever learned going to 8 a.m. lectures and 3-hour labs for 4 years.
But donât get me wrong, those 4 years were an experience of a lifetime.
I met some really cool people. I was exposed to different thought processes and lived it up while on campus. And, if youâre down with paying thousands each year for this experience then sure, go to college.
But if you could care less about the experience, networking, and random adventures, you donât need college.
It just doesnât make financial sense for everyone anymore.
The cost of attending college has increased each year but our pay and your pay when you graduate has not increased at the same rate. In fact, between 1994 and 2014, tuition fees at the average public four-year university have risen 110%.
Mind-blowing isnât it? It may have been the right financial decision for your parents and grandparents to go to college but in this day and age, it might just dig you into a deep financial pit with little to show for it.
But if you must go, I have some advice Iâd like to share with you.
This advice comes after graduating with two degrees and a bit of regret in how I went about receiving those degrees.
Looking back I definitely wouldâve done things differently.
And hereâs how and what you should consider…
- Think your major through and ask yourself, âdo I really need a degree for what Iâm about to do in life?â
- I think you should definitely work while going to school. A part-time job can help pay for books, food or tuition and could result in you paying less interest on those student loans.
- Apply your ass off for scholarships and do any and everything you must to secure âfree money.â Sure you might have to write some essays and meet certain requirements within the scholarship application but the money is more than worth it. Iâd recommend Scholly if youâre looking to save time and get scholarships youâre eligible for.
- Finally⌠consider going to a community college for 2 years and then transfer to a public university to finish up.
- And if possible, live at home for as long as you can.
Just know that going to college for 4+ years not only costs a ton of money but it will also cost you time.
If youâre going to college to satisfy someone elseâs desires instead of doing what you truly wish to do, youâre wasting precious time.
And there have been thousands upon thousands of people throughout history who have made it without ever receiving an expensive piece of paper or stepping foot on a college campus. Like…
- Ellen DeGeneres
- Steve Jobs
- Michael Dell
- Russell Simmons
- Rachel Ray
- Dr. Dre
- Henry Ford
And many, many more.
Success does NOT require a college degree.
Mistake #2) Not Saving After Jumping Into The Workforce
This is one of the worst mistakes Iâve made so far in my life.
And of all the money mistakes to avoid in your 20s in the long run this will end up costing you the most over the course of your life.
Saving and
Iâd get paid, and itâd be gone. When instead, I shouldâve been paying myself first every single month.
Just 10-20% of your paycheck tucked away over the course of a few years goes a long way.
The reality of how broke I was didnât hit me until after I was separating from the military. My eyes werenât wide open as to how careless I was with my money until after I had a sit down with a financial advisor.
After years of working up until that point, I earned a good amount of money. The advisor and I estimated I earned about $375,000 after working full-time for 5 years.
In fact, I started working when I was in high school at the age of 16, right when I could legally start working. So that number is probably a bit higher.
I saved up so I could buy myself a little car after spending so much time riding my bike to work.
That first job was at a nursing home for elderly patients with dementia and Alzheimers. I was pretty much a one-man kitchen. Iâd prep meals, serve the residents their food and clean up after everyone was done eating.
It put money in my pocket. Afforded me some new clothes and humbled me at the same time.
So after adding up how much money I made and blew over the years with that financial advisor, I was pretty mad at myself.
$375,000+ earned through my working life and next to nothing saved in comparison.
My money was squandered. Gone, never to return!
Shit, they make it so easy to spend money nowadays…
You can swipe your card, use apple pay, and a bunch of other apps out there. It all requires little to no thought. At least for me, thatâs how it usually is.
But when I have cash on hand and pay without swiping, itâs way harder for me to spend a lot of money.
So, if youâre reading this and arenât saving a portion of each paycheck, youâre just spending or swiping away, itâs time to stop.
Start saving and paying yourself like yesterday. Your creditors and debt can wait. And Iâm not saying you shouldnât pay them or fall behind on whatâs due.
But, you work for you and your family. So itâs only right you pay yourself 1st after the government takes their cut out of your paycheck.
With the right budget, your bills and creditors wonât miss the 10% youâve set aside for yourself.
Start slow, maybe you just save 5% of your paycheck each time you get paid and gradually work your way up to 10% and so on going forward. But something (even 1%) is better than nothing.
Donât be like the younger version of me and have nothing to show for your hard work and effort. Well I mean I do have some furniture, pots and pans, expensive electronics, and some cool memories.
But for the most part, I have no idea what I did with it all. I was unaware of where my money was going. And right now Iâd much rather have the cash I spent in an investment account or even just my bank account.
Holding onto your money is much better than many of the short-term thrills we end up spending it on. There will always be something new for you to splurge on.
From new electronics to cars, accessories, clothes, and shoes. The cycle will continue on and on. And the funny thing is youâre not really missing out on anything if you choose to go without. What you have already works and is just as good if not better than what theyâre pitching you on TV every day.
Retailers want and need your money to survive.
They have to come up with ânewâ things for you to buy, even if thereâs only a slight modification to what you already have. And letâs be real, if itâs something you really want and need, it can wait! Itâll be there a month, or a year later when your finances better suit making that purchase.
Become aware of where your money is going each month and whenever you are paid. Not paying yourself 1st is one of the best money mistakes to avoid in your 20s.
And you might surprise yourself with how much youâve made and wasted over the years like me. If so, enough is enough, donât stress it, accept it and make the shift towards a solid financial future.
Start saving,
Mistake #3) Buying a New Car
Buying a new car is one of the biggest money mistakes to avoid in your 20s.
And yes, we all need to get from point A to point B.
But how we get there doesnât have to cost you a monthly car note, interest on that loan, or a high insurance bill.
A $5,000 car or cheaper will get you to your destination the same way a 30k-50k car will. Sure that used car might need more repairs every now and then.
But in the long run, driving an older car is cheaper. Even if it doesnât drive as smooth, or look as niceâŚ
They both have 4 wheels and a gas tank.
This is why buying a new car, especially when you canât afford it is a huge mistake.
And unfortunately, one that I have also made and donât want you to make. Unless of course, you are balling and making a ridiculous amount of money and would like to treat yourself, go right ahead.
I didnât always have a nice car. It wasnât until I got into an accident with my old 2004 Nissan Altima that I went ahead and made a bad decision to finance a new car. Why?
Well at the time I was young and way less educated on these financial matters than I am now. I had to get to and from work, and I was tired of paying a ridiculous amount of money for a rental.
Which, for some reason or another I never included on my insurance coverage. đ But thatâs another story…
Because of my time crunch and not wanting to deal with unforeseen maintenance I decided Iâd get something new. So my brother and I went to the dealership, picked a car I liked, sat down with the salesman, made sure I wasnât getting worked over or talked up, and signed the paperwork.
Looking back, the one thing I did do right during that process was haggling my ass off.
I got a bunch of freebies along with my shiny new purchase. And I didnât have a bad interest rate on the loan at all (it was 1.9% for those wondering) because I had good credit and did my research.
Today, I have no regrets about the car. I just didnât need to buy a new car and make payments for something I couldâve paid for one time in cash if it were used.
Once again I cost myself money in the long run. The money Iâve been putting towards my car note every month couldâve been money invested in an index fund.
If you invest that money, in a couple of years, it could gain anywhere from ~5-12% on interest. Youâd have more money and a higher net worth instead of paying a car note and interest on that loan you just took out.
Plus, I donât know if youâve been told this yet, but cars are a depreciating asset.
The minute you sign the paperwork and drive off the lot, that new car you just purchased minutes ago is worth less than what you paid.
So⌠donât be like me and make this money mistake. Shop around and look for something even if itâs a couple of years old or used.
And if you absolutely must purchase something new, do your homework!
Donât get swindled, read the paperwork before you sign it. Bring someone along with you who has your best interest at heart.
And please, please, please make sure the interest rate on the loan isnât something ridiculous. Otherwise, you could be paying more than you should for your new car for many years to come.
Mistake #4) Not Having an Emergency Fund
If an emergency or some random expense came up, could you find $1,000 right now to cover the cost?
If not, youâre not alone. And this has happened to me in the past. Iâve had to go to the emergency room without health insurance before and boy that E.R. bill wasnât cheap.
If I had $1,000 I wouldâve been better prepared for that bill. But I know there are millions of other individuals living without an emergency fund. Studies have shown that just 29 percent of Americans have six monthsâ worth of expenses saved.
And while I donât mean to spread negativity⌠something bad, or out of our control is more than likely to happen at some point, and we should all be prepared for those moments.
So wouldnât it be a great idea if you had $1,000 set aside in a bank account where you could access it quickly if needed?
I think so!
$1,000 in your bank account can cover unforeseen life events like this:
- Car maintenance
- Airfare to see an ailing family member
- Major household repairs
- A trip to the emergency room
And having that money prevents you from relying on others or charging these unplanned
I donât know about you but as a very self-reliant person, I hate asking others for money. So, if you can afford to set aside more than $1,000 for your emergency fund then you should.
But know that $1,000 is just a starting point.
The standard recommendation is to have 3-6 months of your living
Letâs say you lose your job. With money set aside, youâll have the short-term security of an emergency fund until you can land a new one.
I know establishing an emergency fund can be hard though. Especially when starting out.
So⌠start with $1,000 and donât stop saving until youâve reached this goal. Then work your way up to 6 months’ worth of savings set aside. Come up with a plan and start saving.
That way when you need it, your emergency fund is there.
Also, if and when you use it, donât forget to replace what was used. If an emergency happens and you use all the money you saved, replenish it as soon as you can.
You want this cash on hand for the next unforeseen emergency or life event.
Not having an emergency fund is one of the biggest money mistakes to avoid in your 20s.
Mistake #5) Carrying Debt
Being stuck in debt is no fun.
And itâs probably a feeling you can relate to if youâre reading this right now. Itâs also the final money mistake and one of the most important ones on this list. Why?
Because in some way or another it relates to the four previous money mistakes above.
If youâve gone to college (without a scholarship or tuition paid for), never saved any of your money, bought a new car, or donât have an emergency fund, you too are likely in debt.
But donât worry, if you got yourself in debt, you can get yourself out.
While it might take some planning, itâs completely doable.
You may have to make some short-term sacrifices. Not go out with your friends or family, eat out less, and spend less money overall.
But your future is just as important if not more important than always having fun and living in the moment.
Carrying over debt each month can:
- Bring unwanted stress
- Lower your credit score
- Cost you MORE $$$ in monthly interest payments
- Cause you to miss out on things (potential
investments )
However, you can prevent all of the above by making yourself a budget. Once made, stick to it until youâve gotten rid of that debt.
Without a budget or a plan that tells your money where to go, you could find yourself in deeper debt.
It wasnât until I got myself on a budget after being in debt for a while that things started to turn around for me.
Iâm slowly paying off my creditors, cash flowing, and climbing my way out of debt. And every spare dollar counts!
And making a budget today is so easy.
Websites and apps like YNAB, Mint, Personal Capital, and Every Dollar do most of the work for you. All you have to do is enter your information.
And if youâre old school all you really need is an excel sheet or a pen and a piece of paper.
So, figure out whatâs right for you, make a plan and start attacking your debt today.
And with that you now know all of the money mistakes to avoid in your 20s.