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10 Common Money Mistakes Among 20-Somethings: Are You Making Them?

When it comes to money, we all make mistakes… especially in our youth. Speaking from experience and thousands of reader emails, here are 10 of the most common money mistakes I see 20-somethings making today. Are you guilty?

Do you make any of these common money mistakes?Last week, a story about how I paid of over $80,000 in consumer debt ran on the front page of, bringing a flood of new visitors to Money Under 30. Although the article focused on a part of my story I’m rather proud of – how I set my mind to getting out of debt and accomplished the goal relatively quickly – the other half of my financial past isn’t one I brag about. It’s the seven years of overspending responsible for creating that debt.

In my daily interactions with readers, I’ve noticed consumer debt is a less common concern among 20-somethings than it was five years ago. Research supports this. Among people younger than 35, the median household debt declined 29 percent, from $29,912 to $15,473 between 2007 and 2011, according to a February 2013 study by Pew Research.

That’s good. Clearly, people coming of age in the last decade saw how excessive debt was crippling millions of Americans and spawning a major recession. So fewer young people will be making the overarching mistake that ended up setting me back financially by nearly a decade.

But credit card debt is far from the only money mistake we make in our twenties. As a steady stream of reader emails proves, there’s still a lot we have to learn. Here are 10 of the most common money mistakes I see young professionals making today – and what you can do to avoid them.

10. Rushing to buy a home

The allure of home ownership is powerful. After all, it’s the American Dream. And that dream is ingrained in our collective conscious. Whether we think we desire homeownership or not, culture keeps whispering that haven’t “made it” until we own a home.

Try to resist until you’re really ready.

I know people who bought condos and homes as soon as they graduated from college and I know people who, after 30, are renting and have no interest in giving it up (and not just in New York).

Although the results of the early-home buyers were mixed, the apartment-dwellers are generally happier. They have less stress, more free time and money, and more freedom.

Owning a home is rewarding, but it requires time, money, and a serious commitment.

9. Borrowing money for a wedding

Emotion and money don’t mix. And few events in life evoke more emotions than your wedding day.

With the average cost of American weddings surpassing $28,000, tying the knot could be one of the biggest single expenses in life after buying a home and sending a kid to college. But it doesn’t have to be.

Traditionally, lavish weddings have been family celebrations paid for the bride’s and/or groom’s parents. Being older, parents are usually wealthier than their betrothed adult kids, in which case the wedding tab, while still large, makes less of a splash.

What’s happening is more people are deciding to pay for the wedding with their own meager bank accounts, but they are expecting parties on par with family-funded extravaganzas they’ve seen on Bravo reality shows. And they bridge the gap by borrowing heavily.

Now I never judge people for spending money they have on things that are important to them – even if it looks unnecessary or wasteful to most people. And I wholeheartedly understand the desire to create the party (and memory) or a lifetime. I just think here’s one way you don’t want to be reminded of your big day – with even bigger bills. Being newlyweds is difficult enough; don’t compound that stress with unnecessary debts!

On a positive note, many of my friends have opted for simple wedding ceremonies at home or City Hall followed by a casual party. The events are no less fun or meaningful because they cost a truckload less. Sure, a smaller wedding may disappoint some relatives, but if they’re not footing the bill, can they really complain?

8. Not carrying health insurance

In 2010, the average hospital stay in the United States cost $33,079, according to

If you don’t have health insurance, you have to ask yourself: Do you have that kind of spare change lying around?

We shrug off health insurance when we’re young and healthy. And yes, we’re statistically less likely to be hospitalized than older adults. But anybody can have an accident or suddenly be confronted with a serious illness. These events are stressful enough, but you don’t want to pile tens of thousands of dollars of hospital bills on top.

It sucks that our country can’t provide a more affordable healthcare system, but until that happens, you’re responsible. You can stay on your parents’ plan until you turn 26, or you can find lower-cost catastrophic insurance until you have access to better plans. This won’t cover doctor’s visits for every sniffle, but they could save you from bankruptcy someday.

7. Postponing saving for retirement

How do you save $1 million on $30,000 a year? By saving 20 percent of your paycheck for 45 years.

That’s a long time, but it’s also the length of a common career – say between the ages of 22 and 67. The problem is, many of us don’t start investing for retirement at 22 – or even 32! And the longer we wait, the less compound interest will help us reach our goals.

In my opinion, everyone should strive to save at least 5 percent of their pay in a retirement account as soon as they begin working. You may feel like you can’t afford it, but in the long run, you can’t afford not to.

6. Going to grad school unnecessarily

If you can earn demonstrably more money by getting an advanced degree in your field, heading back to school also makes sense. (For example, teachers in many states get automatic pay bumps for having a master’s degree).

And if becoming a doctor or a lawyer is your lifelong goal, grad school is a no-brainer, right?

Maybe not.

Much has been written about law grads with six-figure debt who can’t find jobs, and even the venerable MD faces a tough road. I recently read the story of one medical school graduate who is waiting tables with $300,000 in student loans because he couldn’t land a residency position.

Obviously, this problem is extends beyond English PhDs. Graduate school does not automatically equal job security and more money.

Too often, young professionals see more school as the best answer to a mistaken career choice or a dead-end job. But borrowing tens of thousands of dollars and possibly taking a couple years off of working is a major financial setback. You have to ask yourself if the potential reward is worth the sacrifice.

5. Not building credit

I get frequent emails from readers who get into their late 20s or early 30s and suddenly want to get a credit card or buy a home and realize it’s not going to be easy because they don’t have a credit history. And in the eyes of lenders, that’s as bad (or worse) than having a terrible credit history!

Typically, these readers have made a conscious effort to avoid credit cards and debt. That’s good, but it comes at a cost.

For better or worse, a good credit record matters. Not only when you go to buy a home, but for things like car insurance, renting an apartment, and sometimes even getting a job.

There are ways to build credit from scratch at any age, but it’s easier to get a student credit card or become an authorized user on a parent’s account while you’re still young. All you have to do is pay every bill on time to establish a minimal but healthy credit record.

4. Giving up on a chosen career

If the upside to graduating in a recession was an aversion to debt, the downside was the economy’s aversion to hiring young professionals. With professional entry-level jobs harder to come by, I hear from a lot of readers who either can’t get jobs in their field or can’t move up after a few years.

Worse, many are forced to abandon their career of choice for jobs that don’t excite them but pay the bills.

That’s often a necessary move in the short-term, but failing to get into the professional workforce in your 20s can have serious consequences for your lifetime earnings potential. That’s because salaries top out at age 40.

Launching a career takes years of hard work, but failing to do so will take its toll for the rest of your life.

3. Rushing to pay off student loan debt

Nothing puts a damper on your financial ambitions like a big stinky pile of debt. So it’s natural that most people who graduate with student loans want to pay that debt off as quickly as possible.

That’s a good thing, but I caution people to take a balanced approach to repaying student loans. If your plan is to attack your student debt in five years, you could end up with zero debt (good) but no savings (bad). Then, a small setback like medical bills or losing your job could force you to borrow money at much higher interest rates than your student loans.

Finally, there are valuable tax benefits to putting some money away in retirement accounts like a Roth IRA, while some student loan interest is tax deductible. You may be able to keep thousands of extra dollars by balancing retirement savings and student loan payments rather than focusing solely on the student loans.

2. Leaning too much on parents

If you have parents who helped pay for school, an apartment, or your insurance, count your blessings (I sure do). Because right now people are reading this who paid for college entirely on their own and who can’t choose to live with parents to save rent.

When used to limit debt or reduce expenses for a few years, generous parents can help you achieve financial independence quickly. But they can also have the opposite effect.

Checks from the bank of Mom and Dad are great if you get them, but only if you’re using them to build your own financial life. If, however, this assistance is forestalling your ability to live within your means without help, watch out.

Navigating finances for the first time on your own isn’t always pretty (as a look at my checking account circa 2005 would confirm), but it’s the best way to learn how to be an independent and responsible adult.

1. Failing to plan

I know I don’t speak for everybody, but throughout most of my twenties, I lived for today (or, at least, the semester or the current job). My goals were shortsighted: Pay the rent this month, afford gas to visit friends next weekend, etc.

Eventually, I confronted the fact that getting out of debt would take several years and I began to take steps towards that goal. That was my first encounter with a financial plan.

In personal finance, having a plan separates the men and women from the boys and girls. We have a limited supply of money, so we must decide intentionally what we’re going to do with it. That means balancing needs and wants today with needs and wants tomorrow. Failing to tackle this results in having little to show for years of hard-earned money.

To start making a plan, read 6 financial planning tips for recent grads.

What about you? What’s the biggest life-altering money mistake you’ll never make again?

Published or updated on July 11, 2013

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About David Weliver

David Weliver is the founding editor of Money Under 30. He's a cited authority on personal finance and the unique money issues we face during our first two decades as adults. He lives in Maine with his wife and two children.


We invite readers to respond with questions or comments. Comments may be held for moderation and will be published according to our comment policy. Comments are the opinions of their authors; they do not represent the views or opinions of Money Under 30.

  1. Shane Rowley says:

    I am guilty of number 3, paying off student loans. Too bad it is the best mistake I ever made.

  2. Simon says:

    Am pretty much guilty of #2 and I have learnt my lessons! When the checks stop coming for any reason from the parents, one realizes just how financially vulnerable you are and you have to adapt really fast or sink. Thanks for sharing the list, am much wiser now :)

  3. Mike says:

    Oh cmon. I am 25 years old. Nothing is going to happen to me! I am young, strong, and healthy. Health insurance is for my grandparents not me! Buying health insurance would be a silly waste of my weekend party money! :)

  4. Tonya Rapley says:

    Great Great post. Last year after finally having a stable job for two years (I was becoming accustomed to being laid off during the recession) I realized that I was not adequately prepared for life’s emergency’s nor was I preparing for my future. I’m still working on the savings thing and curbing my spending habits. I’d dare to add, “Not taking advantage of opportunities to this list or Failure to value opportunities”. I received my current job because of a stint that I did with Americrop, that I almost overlooked because I didn’t wan’t to be subjected to living on that stipend. I managed to live on that stipend for 6 months in NYC and was hired by my current job out of the Americorp program.

  5. Mark says:

    “the median household debt declined 29 percent, from $29,912 to $15,473 between 2007 and 2011”

    Umm… that’s not 29% that’s more like 48% ish

  6. KJ says:

    Best advice I ever received was to write down your goals…this includes financial ones too. If you keep it in front of you each day or somewhere that you regularly look at balancing your money (e.g., spreadsheets, phone, etc.) , it makes it that much easier to move toward that goal. Life is short but try to live within (or below) your means for as much of it as you can youngins!

  7. Justin says:

    My job required 3 months of training away from home when you first start. Room, board, and per diem. The best advice I have ever received was from a current employee the day before I left. He told me to set my TSP (govt 401k)15% because I will have no real expenses for the next three months. In those months, he said, I would learn the paycheck to expect as I never received one without such a high savings rate.

    Fast forward to now, nearly 3 years later, and I am still socking away 15% and even though my checks are smaller than my peers who don’t save, I have grown so accustomed to it I will never save less. My TSP should top 40K before my third anniversary which is a huge achievement for me as I just turned 25.


  8. I usually open up these lists expecting to have made a few of the mistakes, but in this case I only skirted close to a couple. In my case, I think you would have to make mistake 6 or 4. When I started my PhD, being a researcher was my dream job. Now that I’m in the late stages, I’m exploring “alternate” careers. Does that mean I went to grad school unnecessarily? But if I didn’t go, would that have been giving up on my dream? I’m comfortable with my choices even though I don’t want the job I thought I did when I started – I’ve certainly learned that I’m still growing and exploring.

  9. Thomas says:

    David first congrats on paying off that loan! That speaks volume itself. I am not sure how much more you can add to this already wonderful list. If people are able to avoid these 10 mistakes alone they would probably be in a great situation. The one for me that really hurt was not investing in my early 20s. When I look back on that money I could have had saved by now is sickening. And to top it off I was given the advice and I wasn’t smart enough to listen. Credit building was another issue but I think they really need to get a grip on credit card companies offering cards to kids fresh out of high school.

  10. Dan says:

    Buy a duplex and live in half of it! Made home ownnership much easier financially (my rent is $200 for a 1 BR all to myself in a major city) and has set me up with a nice source of income in the future.

  11. Very true with #3 and #1. No need to rush in paying student loan at cost of no savings. Also like your analysis and differentiation between boy / girl with man / woman. I wish i could have transformed my thinking at young age from girl to woman. Anyways never mind i hope younger generation learns and I will make sure my kids transform

  12. Kevin says:

    As usual, this article is another great read on

    Great advice!

  13. Tom S. says:

    My biggest financial mistake: trading in cars I still owed money on. If I had held on to my first car, which I had paid off, I would probably be a millionaire by now, or at least have a house. =[

  14. Jessica Lemke says:

    I couldn’t disagree more that buying a house in your 20s is a bad idea. While you shouldn’t buy if you’re not financially or emotionally ready, just like getting married, *age* isn’t the sole or primary contributing factor at ALL–it’s your financial and emotional state of readiness. I bought my first home at 22 years old–granted, the mortgage was at 7% which I was mentally comparing to my parents’ 4% loan–however, I was able to put down a 20% downpayment with my own hard-earned savings. When I sold that home 4 years later, I took home $30K toward the downpayment on my next home–which translated into a 35% downpayment. At 32 years old, 10 years after I purchased my first home, I’m on mortgage #3, which is sitting at 45% of the appraised home value. I’m on track to outright OWN my next home–no mortgage required. When you find the RIGHT place, for the RIGHT price, in the RIGHT location, not buying simply because you’re young can actually be a BAD decision.

    • David E. Weliver says:

      Thanks for the counterpoint, Jessica – you make good arguments. I agree that age has nothing to do with whether you should by a home or not (although I did make the example of buying right after college which perhaps was not the ideal one). By “rushing to buy” I’m hinting at people who buy homes when it’s not the right place for the right price or without the right interest rate or down payment simply because they suspect it’s better than renting. A house purchased wisely often pays off; a house purchased impulsively can leave you worse off than renting.

  15. Ann says:

    I once read, “Buy a house if you plan on staying in that area for at least 5 years”. I loved that, because too many 20 somethings are always thinking short-term. My husband and I are almost 30 and still renting. We have the best of both worlds, because we are renting a home from our friends. We get to experience all the ups and downs (fixing a clogged tub drain, buying a lawn mower) w/o having to pay the property taxes. Eventually we’ll buy, but for now renting is the best choice. Too many run into it though.

  16. Melissa says:

    This is a great list of mistakes to avoid. Thank you for compiling them and helping your readers stay (or get) on the right track!

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