6 Financial Mistakes People Make in Their 20s And How to Fix Them

woman in her 20s dealing with a financial mistake while looking at tablet

Like many people, you may have spent your 20s making financial decisions that served you well in the moment, but may not have been particularly responsible. Dinner out several times a week, credit card bills you barely looked at and car payments way beyond your budget—sound familiar?   

But now, in your 30s, you realize all that overspending is going to cost you big—and it’s going to cost for years to come. Luckily, it’s not too late to fix the financial mistakes we all make when we’re young. Here are six of the most common mistakes people make in their 20s and how to fix them. 

The mistake: Racking up credit card debt 

When all of life’s pleasures are just a swipe away, it’s easy to rack up huge credit card bills. 

The fix: Stop using your credit cards 
Learn how to say no to impulsive purchases and to live within your means. Create a budget to help monitor and track your spending instead of mindlessly plowing through your paycheck each month. Stop swiping your credit cards and stick to debit or cash only.

The mistake: Ignoring your credit score 

Aggressive credit card usage may have handicapped your credit score, making getting a large loan difficult. A poor score will also burden you with an unfavorable interest rate for these loans. 

The fix: Know your score and pay down your credit card debt 
Begin by monitoring your credit score through sites like annualcreditreport.com. Next, work on paying off credit card debt instead of only making the minimum payments. Choose one bill to pay down first and make the largest payment your budget allows. Once you’ve paid it off, work on the next bill until you’ve paid it off and repeat until there’s no more debt.  

The mistake: Skipping student loan bills

When you’re facing a huge debt and have an entry-level salary, it’s tempting to just pretend the debt doesn’t exist.

The fix: Work it into your budget
Call your lender to work out a more feasible payment plan and check if you qualify for a student loan forgiveness program. Most importantly, make payments a part of your debt payment plan so you never miss a payment again.

The mistake: Neglecting your retirement

Neglecting your retirement means missing out on years of compound interest gains.

The fix: Think of it as a fixed expense
Think of retirement savings as a necessary, fixed expense that must be worked into your budget like rent. Work with the most you can afford and max out your IRA or contributions to your company’s 401(k) plan.

The mistake: Not having an emergency fund

Scrambling for funds to pay for a large medical expense or to live off of during an unexpected layoff can be a huge financial setback.

The fix: Start small
Work with whatever you can to make monthly contributions to an emergency fund. Keep your emergency money in an account that earns interest like a Savings Account, but also allows you to withdraw funds without penalty.

The mistake: Not creating financial goals

It’s understandable not to have your entire life planned out yet, but it’s important to set some financial goals.

The fix: Create goals now
Do you want to buy a house within the next decade? Are you hoping to retire by 55? Having a concrete goal in mind will help you manage your money more responsibly.

Set and keep track of your financial goals with My Financial Partner, our free online financial management tool. It’s an easy way to set yourself up for financial success! Plus, when you use My Financial Partner to set your goals from now until February 28, 2019, you could win one of five Amazon gift cards. ¹

If you messed up while in your 20s, it’s not too late to get your finances on track. Follow our tips for a financially sound future.

 

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SOURCES:

https://money.usnews.com/money/blogs/my-money/articles/2018-10-25/how-to-recover-from-financial-mistakes-made-in-your-20s

https://www.thebalance.com/how-to-fix-money-mistakes-in-your-twenties-2385529

https://www.mybanktracker.com/news/fix-financial-mistakes