5 Money Mistakes People Make in Their 20s That Can Ruin Their Financial Future

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Very few people are good with finances in their 20s, and it totally makes sense. Most people go straight from living with their parents to having to make all of their own decisions around money, and there’s definitely a learning curve.

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Though there is some room for error, other mistakes you make in your 20s can jeopardize your future. A few wrong moves and you can destroy your credit, making it impossible for you to get a home loan later on. Or, you can find yourself in a tremendous amount of debt. Though your spending habits won’t be perfect, there are a few major pitfalls to steer clear of.

Here are five mistakes to avoid making in your 20s to protect your financial future.

Never Making a Budget

Refusing to make a budget is a cardinal financial mistake. A budget enables you to see how much you have, how much you’re spending and how much you can save for the future. If you never make one, you are way more likely go into debt simply because you don’t know how much money you have or are spending.

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Luckily, there are tons of great tools that you can use to make a budget. Free apps include Mint, Mogami, and Goodbudget. Though these all have their own style and capabilities, they all give you insight into your spending to help you get better with money. You can also start budgeting with a spreadsheet if you prefer to keep track of things yourself. Track how much you’re spending for a month, then the following month you can make adjustments based on your financial obligations and goals.

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Not Opening a Savings Account 

Even if you don’t have very much in it, a savings account is an essential tool. Start by saving as much as you can each paycheck — even if it’s $10 — and moving it over to your savings account. This way, that money earns interest and grows. Plus, it deters you from spending it since savings accounts have a limit on the number of withdrawals you can make a month.

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A good way to motivate yourself to save is to set aside money for something fun. Though you should always have an emergency fund on hand, set another goal to save for a vacation or other fun splurge. That way, you’ll get to reap the tangible rewards of saving in an enjoyable way.

Relying on Credit Cards

Credit cards have their purpose. They come in handy in an emergency, you can earn cashback rewards and airline miles, and you build up credit. However, if you start to use credit cards to pay for things simply because you don’t have the money, that’s when they become dangerous. You can quickly build up debt that you can’t pay off, sending your credit plummeting. Plus, the longer you carry a balance on credit cards, the more the interest will increase and make the debt larger.

If it’s simply too tempting to use the credit card, cut it up for now and create a better relationship with money with a budget. Once you can prove to yourself that you can stick to a budget, you can apply for a credit card and rest assured you won’t overuse it.

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Skipping Investing

If you’re a broke 20-something, it’s hard to prioritize investing. However, like opening a savings account, even a small amount is better than nothing.

Start with opting to put some of your paycheck in your 401(k) if your job offers that as a benefit. You can also explore apps that are made for novice investors like Acorns, Stash and Ally. Each of these apps specialize in investing smaller amounts of money and act more as a teaching tool to show you how investing works. Having some education in this early on makes it easier to make more substantial investments in the future. 

Not Being Insured 

When your job doesn’t offer health insurance, you might be tempted to skip it all together. Most likely, you’re healthy and don’t even really need to see the doctor every year. However, if something tragic were to happen, the medical bills add up really quickly. If you don’t have insurance, you could be paying them off for decades.

If you’re looking for a cheap option, see if your state offers discounted insurance based on your income. You can always opt for insurance with a high deductible which is specifically made for extreme medical circumstances and costs a lot less than a more comprehensive plan might. Bottom line, though — don’t ignore insurance.

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About the Author

Sam DiSalvo is an LA-based comedian, writer and actor who's performed all over the country. Her written work has appeared in numerous digital publications. As a copywriter, she's worked with a variety of major brands including GoldieBlox and Thrive Causemetics. Sam loves dogs and is currently perusing leisure suits to buy for her corgi mix, Barry

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