We all make mistakes in our 20s. But when it comes to your money and your credit, you can end up paying for those mistakes well into your 30s — and beyond. Avoid these four common errors of youth
The editorial content below is based solely on the objective assessment of our writers and is not driven by advertising dollars. However, we may receive compensation when you click on links to products from our partners. Learn more about our advertising policy.
The content on this page is accurate as of the posting date; however, some of the offers mentioned may have expired. Please see the bank’s website for the most current version of card offers; and please review our list of best credit cards, or use our CardMatch™ tool to find cards matched to your needs.
We all make mistakes in our 20s. But when it comes to your money and your credit, you can end up paying for those mistakes well into your 30s — and beyond.
Forty-four-year-old Tonya Stumphauzer writes about her personal finance journey on her Budget and the Beach blog. She says mindless spending was a big part of her 20s. “I don’t regret spending money on certain things, but I spent lot of money on stuff like CDs,” says Stumphauzer. “And then a couple years ago, I’m trying to sell back thousands of CDs to the record store, hoping I make a few bucks.”Most of us have probably been there. Mindless spending, and overspending in general, is one of the most common mistakes people make in their 20s. Financial adviser Laurie Itkin says it’s all about learning to live below your means. “Just know that if you’re disciplined while you’re young, you’ll have more freedom with your money when you’re older, and when you need it — when you have a family, when maybe you want to leave the corporate grind and start your own business,” says Itkin. “You’ll have a cushion. So delay that gratification.”
When overspending gets out of hand, it can add up fast. Which brings us to mistake No. 2: ignoring your growing debt.
“People don’t want to face up to the problems that they have or where their money is going,” says Stumphauzer. “They don’t want to know how much they’re spending on Starbucks. They don’t want to know how much they’re spending on alcohol when they go out. And it’s not that those things are inherently bad. It’s just that they’re so mindless about it.”
Unpaid debt can take a toll on your credit. To make it less daunting, start small. “I find that once you write down the numbers and develop a plan on how to pay down that debt, it becomes less overwhelming, and you can take it day by day, piece by piece,” says Itkin. “[For] people who have a lot of debt it really make sense to talk to a financial adviser or planner.”
Mistake No. 3? Neglecting to save. Saving can be hard in your 20s, especially when you’re dealing with student loans. But neglect your savings now and it will cost you down the road.
“Right now I’m playing catch-up with retirement, and it’s really difficult because I’m a freelancer,” says Stumphauzer. “You don’t want to be doing that when you’re 44 or 50 or 60. So if you are 20-something and you work for a company that has a 401k, you definitely want to take part in that plan.”
Finally, many young adults often make the mistake of rushing into homeownership. They might buy a home they can’t afford, only to foreclose. A foreclosure will stay on your credit report for the next seven years. Itkin says it’s better to use that money to save for retirement and buy a home when you have more financial breathing room.
Overall, it comes down to living below your means and socking away some cash when you can. Do this when you’re young, and your future self will thank you.