Our 20s are some of the best years of our lives because they are the years when we are still figuring out life and putting things in place.

However, they are also the years when every important decision counts. Your decisions in your 20s can set you on for life or make you struggle through it.

If I asked which you would prefer, I bet you’d choose the former. But how do you ensure you don’t end up with the latter? One such way is to know the money mistakes to avoid in your 20s.

Unfortunately, many people don’t know what to buy in their 20s, which results in some of the biggest financial mistakes that young adults make.

To help, this article will address the major financial errors to avoid in your 20s and 30s.

Also Read20 Things to Do Before You Turn 20

Money Mistakes to Avoid in Your 20s and 30s

I am adding 30s because some people start life later than others. Of course, starting earlier is always better. So, if you’re still young, please take this to heart.

But if you’ve crossed 30, it’s not too late to start making the right financial decisions.

Having said that, what are the money mistakes to avoid in your 20s?

1. Not Creating a Budget

A lot of people spend lavishly because they are not taking the time to budget their money. You can’t afford to earn and spend blindly; you must track your inflow and outflow.

How much is coming in? How much am I spending on bills? How much goes to needs and wants? How much goes to a savings account? Those are questions you need to answer and note down.

Every month, draw out a plan on how you want to spend and determine to follow it judiciously.

Think about all you spend money on and create room for them. Of course, you should reduce some things depending on your earnings.

For instance, if you go out every weekend and see you’re not saving enough due to that, cut it down to twice a week or even once if that’s wiser.

I’m not for excluding entertainment from your budget. I believe people should be able to spend on luxury without guilt at least once a month. The reason is to pat themselves for a job well done that month and also to avoid overindulging.

So, include money for something that makes you happy. It could be going out with friends, buying a dress, eating out, etc. The idea, however, is that you must stick to the plan. Don’t overindulge and let the essentials suffer and don’t exceed the budget.

I’m sure it goes without saying that you should prioritise what needs to be put first, like bills, food, debt repayment fees, savings, investment and insurance, before adding entertainment. You should also add gifts to your budget; it’s important to put a smile on people’s faces once in a while. And, it’s more blessed to give than to receive.

Note that the budget doesn’t have to follow the same strict percentages every month. Some things might not be necessary in certain months, and you can adjust accordingly. For instance, you can reduce the budget for food if you’re not short on groceries. But increasing the budget for savings or gifts, not a luxury, is always advisable when you have more.

Plus, let me add that there are budgeting apps that can help you plan and track your finances.

2. Not Having Savings and Investments

The earlier you start saving, the more savings you have. Having said that, let me go right ahead and debunk two myths.

Savings is not so much about how much but how consistent. Many people don’t save because they think they don’t have enough to, and they believe they will when they do. The truth is that if you’re not saving with your little, you won’t save when you have plenty.

Start now. Save that one dollar; it will add up eventually. And when you can save up to $500, you won’t struggle because you have imbibed the culture already.

The second thing is saving after spending. You’ll set yourself up for failure when you plan to save after spending. Savings should always come before, immediately after your income comes in. And as a Christian, it should be the next thing after your tithe.

But if it’s not easy to put money away, you can apply for automatic withdrawal to a savings account. Some banks and financial organisations have provisions for that.

Whatever approach you choose, understand that you cannot afford not to save for the future, it is very important.

And as you save, make plans to invest from your savings. Investment is tricky, so ensure you read a lot and seek advice. You should also analyse your risk tolerance and take that into consideration. But like savings, investment is important.

3. Not Having an Emergency Fund

Having savings is one thing; having an emergency fund is another. Life throws us curveballs at the most unplanned times, so we must plan for them.

At the very least, you need to have 3 months’ worth of expenses down in case of a job loss or any other emergency.

I usually advise having one account for your emergency fund and another for savings. The emergency fund is completely out of touch except in an actual emergency. The savings can still be touched when you encounter minor emergencies like rent increases.


Money mistakes to avoid in your 20s


4. Constantly Being in Debt

Credit cards can be a curse and a blessing, depending on how you use them. I rather prefer a debit card to buy only things I can afford.

But that’s a personal choice, and I know credit cards have their benefits, like building your credit score. But it needs to be used responsibly so as not to keep incurring debts.

If you are not so responsible with money, you probably shouldn’t use a credit card until you can build up that discipline. Or else, you’d be swimming in avoidable debt before you know it.

Also, don’t take loans for luxury, it will do you no good. Buy a secondhand car if that’s what you can afford instead of taking a car loan, except you are getting the car for business.

In essence, I’m saying that you should avoid debt as much as possible.

5. Impulse Buying

One of the biggest financial mistakes young adults make is impulse buying. There is so much pressure to keep up with trends in your 20s, especially due to social media.

The platforms themselves are not helping with their strategy to advertise your interests to you. To be fair, they need to make a profit, and that’s the goal of every business. So you can’t blame them.

But you need to prevent falling into the trap of impulse buying. Therefore, make sure you follow your budget strictly.

When tempted, ask yourself, “Will I still need this item tomorrow?” If the answer is no, it’s unnecessary.  

6. Not Having a Retirement Plan

In your 20s, retirement always seems far. But you must always see retirement like it will happen tomorrow, that’s the only way you can save for it as you should.

If you see it as something that won’t happen in 20 years, you may not start saving early. And remember, the earlier you start, the better. Apart from the fact that you will have more than enough, you will also have compounding interests that way.

So, if you don’t work in a company where there’s provision for that or are an entrepreneur, research the best plans you can start paying into.

7. Overspending

Overspending is one of the money mistakes to avoid in your 20s that many young adults, unfortunately, don’t adhere to.

Again, many people in their 20s and 30s buy into social media pressure and spend on frivolous things that never ultimately satisfy their cravings.

For instance, why must you use the latest iPhone when your current one is in perfect shape? There is really no reason besides showing off or looking cool among friends.

But the problem is that, that money could have been invested to get you a bigger return. Or it could have been saved towards a retirement plan. And in hindsight, while your friends are recounting phones bought in their 20s, you’re set up for a stress-free retirement.

So, when you’re wondering what to buy in your 20s, remember to consider if it’s essential. 

This is not to say you shouldn’t splurge or treat yourself occasionally. The point is that it shouldn’t be the bulk of what you spend your money on. A larger percentage should go to vital things.

Again, when you make more money, increase your savings, not your spending.

8. Lacking Financial Literacy

Unfortunately, a lot of young people lack financial literacy. And that has been one of the major issues plaguing young adults.

But that doesn’t have to be the case.

Read books, spend time online getting knowledge, and pay for financial courses if you have to, but you cannot afford to be ignorant.

Learn about the different kinds of savings, investment opportunities, mortgages, taxes, bills, budgeting, credit scores and so on.

Also ReadCommon Financial Mistakes to Avoid for a Wholesome Life

What Next?

When making decisions in your 20s and 30s, you must often consider whether your older self will thank you for it.

You don’t want to bite your fingers in regret when you’re older for not taking advantage of financial opportunities to set your money in order. You don’t want to look back, wishing you made the sacrifices when you had the strength to.

So, if you’re asking what next? It’s simply to understand the money mistakes to avoid in your 20s and make better decisions.