7 Money Mistakes You’ll Make In Your Twenties

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Your 20's are going to be rife with exploration, fun times, and lessons well-learned. Unfortunately (or perhaps fortunately, I haven't decided which!) most of our lessons come from when we make mistakes. Your 20's are the decade where you go from your parent's house and bankroll to managing your own financial household, to planning for families and retirement and tackling your college debt; with all that change going on it can get pretty dicey.

Don't worry, you're not alone.

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7 Money Mistakes You'll Make In Your Twenties

You Won't Negotiate Your Salary

Payscale reports that 60% of people don't negotiate their first salary.  I know I didn't for my first job. I half-heartedly attempted to at my first job in NYC and got promptly smacked down, which stung a bit in the moment.

But it didn't mean I lost out on the job or that they treated me any differently. And it taught me an important lesson about asking for the things you want: the worst anyone can say is “no.”

Wait a minute..I'm just beginning to figure out how to pay my own bills and you want me to negotiate with someone OLDER and WISER about a job I'm simply grateful to be offered, anyway?

Yeah. It's daunting. But this salary bar will set the salary bar for all future negotiations. It is that serious. It's never too late to start negotiating.

You'll Live Life Without a Budget

Many twenty-somethings don't get hip to the idea of a budget until later on in the decade when it comes time to save up for something important, like a house, wedding, trip to Europe. etc.

Or if you're like me, you'll budget like a maniac during those ramen noodles and futon years and relax a bit as your earning power increases in your mid-to-late 20's. Many people also forgo budgeting because a record number of them (30% in this 2012 study) are still living at home with Mom and Dad who are footing a large amount of the bills.

Either way, budgets are important for staying on track with your spending so that you're a) only spending on what fulfills you most and b) contributing to your financial goals. (We have a free budgeting template that you can get here!)

No budget = higher susceptibility for making further financial mistakes in your 20's and 30's… like more debt, less money for retirement..the works. Here's a great getting started guide to building a budget if you need one or are thinking of revamping your existing model.

You Won't Contribute Enough to Retirement

Ooh. This is a toughie. I hesitate to call it a financial mistake and instead prefer to refer to it as a “financial circumstance.”

Many 20-somethings graduated college in the middle of the recession. Rising student loan burdens coupled with high unemployment and lower entry-level salaries have created a perfect storm for people not having enough money to contribute to retirement, even if they wanted to.

In a survey conducted by the Indexed Annuity Leadership council in March and April of this year, 37% percent have no money set aside, and those who do save have little, with 18% having less than $5k in the accounts.

I know I don't have nearly enough saved and am barely beating my counterparts with $9k in savings. I have plans to ramp up before I hit 30, but I am behind because I bought a house, paid off debt, and in general, didn't make retirement a priority.

Do what you can, when you can. Start small (see my beginner's investing guide here). Better still, use Ellevest's free investment planning tool to get clear on your goals and what it will take to get there. Use this link (it's an affiliate, btw) to input your own numbers.

You'll Live Without an Emergency Fund

Take the reasons I listed above for 20-somethings not contributing to retirement, and you have a large reason why many live life without an emergency fund. Truthfully, I spent the first few years of my 20's living life without an emergency fund (in New York City, no less) choosing instead to use all my money for paying down the initial $10k in credit card debt that I graduated college with.

But this was wrong. Emergency funds make your life better and they keep you out of the credit-debt payoff-rack up credit again- spin cycle. They also make you feel more secure and financially empowered.

Get an emergency fund. Even if it is just $1000 to start, it will go a long way.

You'll Turn to Your Credit Cards (When You Shouldn't)

Even if you have a small emergency fund, it can be hard to resist the siren call of lucrative credit card reward points, travel points, and cash back. Many begin to travel hack or leverage these cards without really knowing how to use them effectively.

I only know a handful of people who have never battled with credit card debt, which can be scary given that many also contend with student loan debt. They either got into a habit of overspending, went on a luxurious vacation, or used a card to fund an emergency.

I'm guilty of this as well, as I maxed out my cards in 2013 to fund my runaway renovation,  which is why I want to advocate using your credit cards with discretion and paying off the balance in full. Using the card for “a little here and a little there” can add up over time and land you in a big hole by the time your 30's roll around.

Also be sure to check your credit regularly. (You can do that, here.)

RELATED: How to Get Out of Debt with No Money

You'll Give Into Lifestyle Inflation

Personally, I think this is the hardest battle to fight in your 20's. And I'm not saying you should eat cereal and steal toilet paper from work for forever, but it gets very exciting, very quickly when your standard of living goes up.

Just don't give in too much. Lest you could wind up living paycheck to paycheck, or house/car poor like many people. My bud Erin Lowry wrote a great article on how to combat lifestyle inflation and what to do with the extra cash here.

You'll Make One Big, Emotional Money Decision

Of all the “mistakes” on the list, I'd argue this one is the hardest to avoid, because money is inherently emotional. And even if you're normally great with money, nobody is perfect.

Whether you move in with someone you won't wind up with for the long haul (which is expensive!), follow a significant other to a new city, go back to school, take a job that pays less because you think it will land you someplace better: these are all emotional money decisions, risks..really. Sometimes these payoff, and sometimes they don't.

But these emotional money decisions are often the ones that teach us most about who we are, where we want to go, and what kind of life we want to lead.

This in and of itself can be really beautiful, so live prudently when you can, but also go with your heart sometimes, money be damned.

After all, didn't I start the article by saying your 20's were for exploration? 🙂

Your twenties are an emotional time - and an expensive one. Since we've been there/done that, we made a list of the 7 money mistakes you'll make in your twenties. Don't freak out, everyone makes them!


    • Mill Street Times
    • August 16, 2015

    Definitely guilty of not negotiating a salary early on. I was just happy to have a job! It’s amazing at how hard it is to stick up for yourself and ask for that raise or bonus. Hopefully, this will help other people in their 20’s realize earlier than I did that everything is negotiable. Thanks for the confidence and tips!

    1. It can be tough, especially when there are authority figures in your first job and we are raised to “mind” our authority figures throughout school.

  1. Yup. 7 for 7 here. Good thing I’ll be 30 this year so I can nail all of these now 🙂

    1. You’re only 30? Now I feel behind 😉

    • Alex Larabee
    • July 28, 2015

    Not sure if you have any expertise in this field…but reading this makes me think about my 401K retirement account. I contribute 6% and my company matches up to 6% only 50 cents per dollar…You also aren’t vested until 4 years…Anywho…I feel like in my late 20s (27), I am having difficulty knowing what exactly I should have at a certain age for retirement. I would love a post on that! like I have less than 30K in retirement accounts, but is that good or bad for people my age and how can we improve?


    1. Another blogger, Bridget at http://www.moneyaftergraduation.com writes a lot about retirement and investing and is much more well versed in the subject than I. She recommended that my numbers in this post were too high: http://www.lbeeandthemoneytree.com/much-save-retirement/

      She recommended having 25k by 30.

        • Alex Larabee
        • July 30, 2015

        Awesome! Thanks so much Lauren! I love your posts 🙂

      • NicoleW4240
      • January 14, 2016

      That’s a really tough question since it really depends on many different circumstances. Someone making $150K/year will have a much different goal than someone making $60K/year.

      I’d recommend checking out the Rule of Multiples by the Financial Samurai, who offers the multiplier of your income by age. For 30, he advises having 2X your annual income to be on track to have 25X your annual income by 65. Of course there’s aways exceptions. Here’s the link so you can read it direct from him:


  2. It’s pretty recent for me, but lifestyle inflation has definitely become my biggest challenge. Mostly a late 20s phenomenon, when you get out of struggling to get by and start to have some semblance of disposable income- and then blow it all 🙂

    1. My lifestyle inflation has definitely exploded since I bought my house at 26. It feels good to be out of that struggle-bus phase, but I’ve definitely had a few moments where I’ve been like, “where did my money go?”

  3. Giving in to lifestyle inflation is a big one I’ve noticed among people my age (I graduated college 7 months ago). Starting full-time jobs, many people would start getting new TV’s, all new furniture, live in an upscale apartment, buy a new car, etc.

    I’ve combat it well since I’m trying to pay down my student debt. My friends tease me about how frugal I am sometimes but it’ll pay off soon enough!

    1. You keep doing you! Fortunately, I didn’t have to content with lifestyle inflation too much bc by the time I made real (read: non-actor) money, I lived in NYC and barely had enough to get by!

  4. These are so true. The lack of an emergency fund has been a real issue for me. It has been the primary reason for racking up credit card debt because I had an emergency come up (tires, vet bill, trip to Hawaii) that I didn’t have the money in savings to cover. Now I am working to rebuild my emergency fund and keep myself away from the credit card.

    1. My emergency fund is small, but I almost never crack into it unless I absolutely have to. I hope to have it full funded by year’s end!

    • Hello Pre Nurse
    • July 15, 2015

    Good call Lauren – I made pretty much all of these mistakes already and I’m only 24. 🙂 -Kayla

    1. Thanks Kayla!

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