11 Financial Mistakes to Avoid in Your 20s


The 20s are a wonderful and life-changing era in everyone’s life. As people reach the end of their teenage years, they begin to take their initial steps into a world filled with roles and responsibilities. The 20s are also when people start to plan for the decades that will follow. At this age, in addition to the duties that come with taking care of a family, you may also have to take responsibility for your financial situation.

Financial Mistakes
  • Save

But the 20s are also an age when we make many financial mistakes, particularly because we are still learning how to manage our money. Let’s take a look at some of the common financial mistakes that people in their 20s should try to avoid.

#1 Having insufficient knowledge of budgeting

You probably settled your first job in your 20s. When we move to a new place or even just a new life, we frequently forget how to manage our finances properly.

However, a budget is required to organise one’s money properly. Failure to keep accurate records of one’s expenditures and sources of income can result in confusion and an unbalanced state of one’s financial situation.

To maintain a budget, all that is required is to keep a record of your income and expenses, set certain goals for yourself, and change your financial activity following those goals.

Having a budget allows you to identify costs that may be avoided and helps you optimise your spending.

#2 Not setting financial goals

In the modern world, being particular and having a clear understanding of the monetary objectives you wish to achieve is essential.

If you do not put proper thought into your retirement planning, you risk entering your golden years with less money than you had hoped. A lack of savings leads to a reduced level of financial stability and increases the risk of debt burden.

#3 Not create a good credit score

Receiving an apartment, applying for a credit card, or getting a loan all need to have a credit history under your account first. Building up a good credit score is a process that takes some time and requires creating creditworthy behaviors, such as being on time with all of your payments. If you struggle with bad credit and want a great solution you can click here.

You should try to avoid opening too many accounts all at once, and you should work to maintain your credit utilization. The volume of credit you use compared to your limit is as low as possible. Either pay off your credit card balances in full each month or keep them at a level that is no more than 30 percent of your available credit.

#4 Delaying retirement savings

There is a common misunderstanding that you do not have to begin saving for retirement until you are in your 30s or 40s. However, many people fail to appreciate that accumulating wealth takes a significant amount of time. In addition, retirement can mean you no longer receive any income, and you might have to rely on the money in your retirement fund for many years. As a result, you need to begin saving for your retirement as soon as possible.

#5 Careless spending

You see a lovely piece of furniture that would enhance your interior design and cost nearly three-quarters of your monthly salary. However, you already have furniture in your home that is very similar to this but of lower quality, which means that purchasing this might be nothing but an unnecessary expense for you.

However, if you believe you have the financial ability to purchase it and go ahead and do so anyhow. This is a typical case of careless spending.

When you are in your 20s and just beginning to make a significant amount of money, it’s not uncommon for you to fall victim to it. But if circumstances get tough, it could put you in a difficult financial situation.

As a result, before deciding to purchase something, you should always consider how significant the acquisition of that thing will be for you.

#6 Failing to initiate a savings plan

Imagine that you are enjoying retirement and have settled into a pattern with your life when suddenly, you are faced with a financial emergency. But you haven’t made any preparations for something like this. In addition, you tend to be pretty extravagant in your spending.

And now you are left with the stress of wondering how you will overcome this unusual monetary challenge. You might wonder what difference it will make if you start saving money in your 20s or if you have financial problems when you’re older.

However, the reality is that some people never get around to beginning their savings. Deciding to save and invest in your 20s gives you a head start on planning for your retirement years, which is the greatest time to invest as early as possible.

#7 Lack of an emergency fund

An emergency fund is always useful in case of an unexpected loss of savings, such as the loss of a job or having to pay for unexpected medical expenses.

If you suddenly lose your source of income, having an emergency fund can assist you in getting through the difficult times until you are back on your feet financially.

#8 Spending more than you earn

Especially when you’re in your 20s and life is full of possibilities, you could feel the impulse to spend more money as your income increases.

This could cause you to spend more than you earn, and if that happens, you might look at yourself in a position where you have no choice but to take out loans in order to pay off your debts.

Therefore, it is usually a great idea to keep track of your earnings and to make sure that you cut down on any spending that isn’t required.

#9 Not getting covered by insurance

When we are in our 20s, we do not think about getting insurance because we do not have any dependents. Since we are still relatively young and in good condition, it is hard for us to imagine how our life could take such a terrible turn.

On the other hand, if you have an Education Loan that needs to be paid, you must invest in an insurance policy that will pay out in the case of an untimely death. Your work may provide you with some sort of insurance coverage, but it will probably be very limited and insufficient.

In addition, given that you are just beginning your career, you might consider changing professions soon. It is to your benefit to purchase insurance early in life to take advantage of lower premiums and a longer policy term.

#10 Not making use of free time

You will never have more time and energy than you do right now, so make the most of it while you can. This is a limited resource, so rather than spending your leisure time viewing back-to-back episodes of your favorite series, you should invest that time toward making some more cash.

A side hustle can frequently result in a lucrative income. Several micro jobs can be performed to earn additional money for personal expenses.

#11 Lack of a well-balanced portfolio

We hardly have enough savings in our 20s to cover a few little investments. We base our selections on the opinions of our peers because the majority of us are not knowledgeable about the many investment products available.

Our needs should always drive our criteria for making financial choices. We must evaluate both our current financial situation and the amount of capital that we have available for investment.

One of the most harmful errors we make is putting all of our money into a single type of investment. Consider the following scenario: you decide to put all of your money into equity shares. When the market falls, the entire portfolio’s value drops, and you may find yourself in a state of fear as a result.

When you diversify your holdings in the portfolio, you not only improve your chances of earning larger returns but also lower the risks that are normally connected with doing so.

11 Financial Mistakes to Avoid in Your 20s
  • Save


Your 20s may be the best decade of your life. However, when you are at the peak of your physical and mental health and have fewer responsibilities, you should think about your future self and act accordingly. If you keep the above tips in mind, you may ensure a happy and successful future for yourself.

  • Save


Hello Happy readers! This is Rituparna Guha. I write about Positivity, self-care, Simple and effective beauty secrets, today's fashion, and trends. Basically, I'm a girl who has a passion for learning something different and new. I really love to be innovative and creative. Hope you enjoy my company 🙂

11 thoughts on “11 Financial Mistakes to Avoid in Your 20s”

  1. One thing I had learnt early in my life was always to have an emergency fund stashed in a safe place away from my reach so that I don’t get the temptation to spend it. Once I decide to buy something I wait it out for a few weeks and then indulge if absolutely necessary. This prevents me from overspending.

  2. 20s is the best time to start planning for our finances. Responsibilities are less, and we have a long way to go. So, this should be in our priority list. And considering the pandemic experience, we must have emergency fund.

  3. Damn! So true. I wish I could have avoid these mistakes in my 20s. But thats irony. Experience teaches us everything. But so glad you put it across so all our Gen Z will start implementing saving culture from their first salary. ❤️

  4. The 20’s is a time when most people do not even think of their finances. Most of us are intent more on spending and hardly anyone thinks in terms of the long term. These are some really practical mistakes that most of us have made or are making. It is good to be aware of these in advance and do proper financial planning before it is too late.

  5. Great tips! I strongly believe 20s is the best time to kickstart your career and a financial journey. If we wisely plan our finances during that period, it will help us for long term.

  6. I just felt as if I am reading my own mistakes which I did in my 20s! My Godd this is sooo much trueeee!!! I would really like to send this blog to my adolescent self. Beautiful!

  7. Financial literacy is very important and these tips are amazing. I am glad that people are actually talking about it. I enjoyed reading your post and it is really helpful for all of us. Thank you for this one.

  8. You are bang on in the list you have shared. Having passed this phase I have learned this by facing a few and from my friend’s experiences. The 20s is an easy path to deviate from your financial goals, we need to be thoughtful of our spending.

  9. Woohoo!!! So happy to be reading articles like this. I may not in my 20s anymore yet would say that you’ve nailed those list. One comment I would just like to say is that most items on the list still applies no matter what age you are in, as long as you know that you’re not in a good financial disposition yet or you have no control over your finances.Everything is still possible as long as you put your mindset into it.


Leave a Comment

Share via
Copy link
Powered by Social Snap