Terrible Money Mistakes You Need To Avoid in Your 20s (& How to Fix Them)

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You’re smart by coming here to plan on horrible money mistakes to avoid in your 20s.

Because, this person right here writing this, didn’t do any of that…

Yes, I do have a personal finance blog covering my journey to better myself with my own money management superpower but in truth, there are a lot of stupid money mistakes that I’ve done so far.

I want to list them all here because;

1) This kinda sets as a reminder to myself to NOT do them ever again, and
2) You will get to learn from them.

I did these money mistakes so you don’t have to.

I’m going to share the mistakes I’ve made and the solutions I’d taken (if any, ha ha) as well some of the other pressing issues on millennial money that others might have come across.

So that if you’re one of the people who are currently facing them, you’ll have an idea on what to do.

Also, because I’m currently high on printables (checkout my Printables by Number review here), I’ve made a money mistake journal that you can download for free and fill them with your own money mistakes.

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You might have resolved some of the things and you can write the solutions that you’d taken.

Or, if you’re like me, if you still have some unresolved money mistakes, now it’s the best time to get your Google hat on and find the best solution.

This journal can then be passed on to your children so they will understand your own financial hardship and learn from them.

I’ll be separating them in categories with many small and major money mistakes inside 😊

Now, without further ado, let’s get rolling!

More From Me:

8 Easy Investments to Do In Your 20s
How To Buy A House In Your 20s
Best Personal Finance Books To Read In Your 20s

1) Higher Income = Higher Spending?

I’m sure I’m not the only one out there who’s waiting for the new year to come for you to get your assessment done at your job and get your yearly salary increment…

I usually got them in the month of April and my salary on average increased 20-30% every year.

That’s a lot because of my industry and how people are charging a lot higher nowadays outside of the company.

And when I changed my job, I got an 80% salary rise. I was on cloud nine.

So I did this:

  • Got a $2,000/month apartment in downtown that I don’t need. Because I wanna feel like I’ve adulted.
  • Pay for a mentor that’s way too expensive.
    • I don’t regret having a mentor, one of the reasons I had the guts to quit my 9-5, but I was paying the fee every month for a year that’s just too expensive for my budget.
  • Buying a new camera because I thought I will need a good camera to shoot when I travel because my phone was slowly dying..
  • And then buying a new phone on an impulse
    • literally an hour before flying back from Sydney because they were having a sale when I hadn’t allocated any budget for a new phone. Also, the fact that my new phone has an awesome camera and my new mirrorless camera was practically irrelevant now.
  • Getting an even more expensive IPL package because well, I got the money now.
  • I avoided looking at my budget sheet when spending all of these and turned out, I didn’t have all that money anyway. Therefore, credit card debt! Kaching!

Honestly, getting higher income doesn’t always mean you will need to increase your spending.

I avoided looking at my budget because I knew I was overspending, and I didn’t want to face the music. Always look at your budget sheet before doing any big purchases.

Anyway, here are things I did to rectify this money mess I’ve made.

  • I moved out of the apartment even before my contract ended.
    • Negotiated with the owner and found someone to take over my contract. I went from paying $2,000 to $700 a month. I used the deposit I’ve put in towards my credit card debt!
  • I couldn’t do anything with hiring a mentor, so the only thing I could do at that time is to actually apply everything that I’ve learned. And I actually quit my job and when freelancing.
  • I kept the phone and sold my camera for a good price.
    • (I bought it at $2,900 and sold it off at $2,600 but I’ve used it for about a year)
  • My phone works great, I use Google Pixel 3 and I want to try to keep using it for at least 4 years with good care. It’s 2 years old now but it still looks new!
  • I have a “splurge” budget and if there’s something I want to buy on impulse, I’ll see whether the price is more than the fund, or not.

Takeaways for you:

Getting higher income is fun and gives you more flexibility. But that doesn’t always mean you need to spend more.

If you were to get a higher income, half the incremental pay and contribute the first half to your savings or retirement account.

Another half is for you to enjoy 😊

This way, you still get to enjoy the benefits of working hard to get that extra income while increasing your asset section at the same time!

2) Spending Your Entire Savings In One Month

money mistakes to avoid in your 20s

I was super loaded when I was in college and a few months after graduating. Don’t we all feel that way though?

Anyway, I received a student loan that covers more than my tuition fees and I took up a few part-time jobs that in total gave me $10,000s! Wohoo!

And now, let me tell you how I spent everything with a blink of an eye 😊

  • I went to a rather fancy private university and I thought of keeping up with the Joneses there!
    • So I bought a new branded handbag, gave my parents new branded wallets (that thankfully my dad still uses till today!)
  • I bought a new phone.
  • I moved to a more expensive student apartment that’s more comfortable (oooh déjà vu!)
  • I travel everytime I had the chance – 3 months in Europe, 1 month in Mauritius and a few other island getaways
  • Bought Coldplay’s concert ticket on an impulse…in Melbourne!
    • Before even buying the plane ticket (honestly I did the same thing with Post Malone’s concert in Sydney a few years later) 

Good dang, I was on a roll!

It’s good to have fun, but it’ll be even better to your wallet if they can see all of these things coming. The reason of creating a “splurge” fund!

Now let’s see some of the things that I’ve done to learn from this living-like-Joneses era:

  • The last time I bought a branded handbag was back in 2018. I’ve learned (and still learning) to find my own style that’s not necessarily always up and trendy but more towards simplicity and timeless pieces.
    • Unfortunately for this, you are the only one that can help yourself to stop shopping as much. There are a lot of tricks to stop buying things but being aware that you’re a shopaholic and the need to stop will be the first thing you need to do.
  • I totally didn’t learn my lesson on buying a new phone and renting a more expensive place because I still did that even when I was working.
    • But I guess, the fact that it had to come out from my hard-earned rat-race job money, was more painful than it did when I was in college.
    • But I learned. The hard way.
  • There’s a conflict between money and travel.
    • Though I never regret spending money on travels, I do feel like it could be better planned. And I don’t actually need to do everything in my 20s and spend all of my money on travel.
    • It’s good to go out and see the world when you’re young. But that shouldn’t be at the expense of your savings and retirement account.
    • And more importantly, don’t ever go into debt to travel. Unless you have a critical illness and your insurance will cover those debts (okay, kidding. I totally took that from Grey’s Anatomy)

Takeaway for you:

It’s easy to feel like you need to do life when you’re in your 20s. It’s not wrong.

But putting attention to your money in your 20s is also important – if not more important.

If you’re still in college, have a savings account. At the end of the year, take half of the savings to enjoy, travel, do the fun things that you want and put another half to an investment account.

Also, choose your friends wisely. Learn to say no. It’s not the end of the world 😊

3) Investing Money With No Proper Education

I think this is even more important these days because I can hear everybody left and right telling me to invest my money in stocks since the economy is currently down.

While it’s true that you need to take advantage of the situation, it doesn’t mean you need to jump into any shiny investments with no proper knowledge when it comes to investing.

Let’s learn from my mistakes below:

  • I “invested” in Bitcoin when cryptocurrency was at its peak in 2017-2018. I didn’t know what I was doing but because my colleagues were all about it, showing me how much they’ve made trading in a few days, I just had to do it too.
    • The results? I lost money that I couldn’t lose. I was still earning peanuts at that time and I just kept losing money.
  • I want to get a head start at investing when I first started my corporate job and the first investment I did outside of the compulsory retirement contribution was to invest in a unit trust.
    • It’s a good thing to start early but I didn’t know about any fees or the fact that there are many other fund managers out there that I could choose from and I didn’t even know the funds that my money were invested in.
    • I took out the money for another fund manager after more than a year and I lost money due to all the fees.

And now, I have certain personal rules when it comes to investing my money

  • I don’t invest my money if I don’t understand the “thing” I’m putting my money into
  • I will write down every single fee that my investment will incur from enter and sales exit, fund manager fees etc.

Takeaway for you:

Don’t chase after shiny objects.

Instead of only listening to people, turn to real investing books.

And trust your gut. If you don’t feel knowledgeable enough in certain areas (like options, futures, crypto), then it’s okay to stay away from those.

There are so many other ways for you to invest your money. Pick one vehicle that you like and really focus on that.

I personally like to have my money invested in a passive, low cost fund.

4) Not Understanding Interest Rates

Let’s be honest everyone, was I the only one in their 20s, not understanding what it means when it comes to interest rates?

If you’re one of them, good news my friend, you’re not the only one 😊

A few of my mistakes that I need to come forward with you:

  • I grandfathered a savings account that’s been set up by my parents. I’ve never searched for any better savings account out there, until I was 26 years old. Oh, all the money I’ve lost…
    • Matter of fact, I didn’t even know how to find the best savings account!
  • I didn’t calculate the interest amount of my mortgage – which turns out to be about 48% of total payback.
  • I didn’t take my credit card’s interest charges seriously…

It’s honestly not rocket science to fix this. You just need to Google all of this and read a lot more personal finance books.

Some of the things that I look at when choosing a savings account would be;

  • FDIC insured. Always. So you won’t lose your money.
  • I don’t want an account with a tiered interest rate. Meaning you’re only going to get a higher interest rate with a big amount of money. I say no to that.
  • No penalty or minimum deposit.
  • No transaction fee.

Takeaway for you:

Before getting a house loan or any big loan from the bank, equip yourself with just how much you’ll be paying for interest. Is there other option or other bank that can give you better interest rates?

You need to know that hire purchase loan’s interest is structured differently from a house loan.

Your credit card’s interest rate also charges you differently.

In order for you to know all of this (you don’t need to know everything today) is to search and get yourself understood of all these interest rate talks online or someone who’s fluent in finance before taking anything that gives or takes interest money.

This could be loans from the bank, you credit card, your utility bills for late payment, or even with your savings account.

5) Business Mistakes You Want To Avoid

money mistakes to avoid in your 20s

You can definitely relate to this if you’re also earning from your side hustle or have a small business that you run.

These mistakes are really newbie-prone just because we don’t always have someone to guide us when it comes to this. Even online business courses don’t always teach us this bit.

But here are some of the things that I’d done, that I really wish I had done them differently:

  • I didn’t have a separate account or budget for my side hustle. Everything comes from 1 bank account and it’s safe to say that it was a total mess.
  • I didn’t register the side hustle as a business. Therefore any income is taxed at the income level without getting to deduct the expenses incurred for the business’s operation.
  • Even when I had opened a business bank account, I didn’t pay myself as an employee and keep the profit to be reinvested. I instead dip into the bank account’s balance at any time I want. So professional, I know.

Even though I graduated from a business school, went to a business school for 4 years, no one, I mean not one subject prepared me for all of these.

But, it’s okay, I learned 😊

Here are some of the things I’ve done to fix them:

  • Well, one of the first thing I did was to register my business as a sole proprietorship. I didn’t incorporate it yet because the auditing that needed to be done for a corporate is much more tedious and will need more money to hire someone to do them.
    • Since I still haven’t earned in the hundreds of thousands, proprietorship is fine with me.
  • Once I’ve registered the business, I keep a balance sheet of the business’s income and expenses every year.
    • I’m not taxed at income, but at profit. And, if my business is at a loss for that particular year, I can bring the negative amount to the balance sheet for the next year.
  • I have a separate budgeting tab for my business now. Very similar to my personal one – you can get my budgeting template here.

If you want to learn more about this, I did create one post on how to budget your money as a freelancer here.

Takeaway for you:

This probably wouldn’t worry you as much if you’re not going any side business.

But if you are, and once you’ve started seeing some income coming in, it’s better to register your business even as a proprietorship.

Don’t forget to open up a business bank account too. You can apply for a credit card for your business, and perhaps it’ll make things far better for your business.

If you have a rather global team under you, you might want to consider an online business bank account like Transferwise.

6) When You’re Good with Money But Your Partner Isn’t

I’m not sure why this issue isn’t discussed as often but if you’ve been in a relationship where your financial habits don’t exactly align, you have to start being honest with yourself and your partner.

Some of my experiences that you might be facing right now too:

  • You have a budget for a weekend getaway but you know you’re going to burst your budget looking at the place your partner has booked
  • The way you split your bills with your partner isn’t exactly the way you want to do it. Maybe you’re paying more every time when you prefer for it to be 50-50
  • Your partner never pays for gas – okay this is a rant on my side.
  • You’ve planned for grocery budget but your partner is more of an impulse buyer and buys all the imported stuff

Honestly, if I were to list every incident where I wasn’t exactly the most comfortable when it comes to money with my partner, this list will be long….

But I wish I had just the guts to do this one thing…

..which is talk to them. Upfront.

Takeaway for you:

Be honest with your partner about where your finances are.

If you’re not comfortable discussing how much you earn, at least mention to them how much you’re budgeting for certain things that you share with them.

It could be rent, groceries, bills or even gas.

Sometimes if you’re short on your budget, they might offer to cover a few things for you.

It’s totally up to you whether to accept them or not. I used to have a big ego and say no most of the time, but right now, I would usually accept them.

But definitely repay with a few things that might not necessarily have monetary value.

*wink wink*

I mean like a massage or a fancy homecook dinner. Duhh.

Now these are just some of the mistakes that I’d made but I know there are a lot more money mistakes that we all need to be aware of, get educated on them and avoid at all cost.

Other Money Mistakes To Avoid In Your 20s

money mistakes to avoid in your 20s
1) Not Taking Advantage of Tax Relief

Go to your country’s specific Internal Revenue Board website and get the list of tax relief that you can get for a specific year.

They change the list every year based on your country’s approved yearly budget.

2) Not Saving Enough For Retirement

Most of the time, the money that you automatically contributes to your retirement from your employer like 401(k)s, are not going to be enough to sustain your retirement period.

You’ll need to find other ways to invest. Check out my top 8 investments to do in your 20s, for beginners.

3) Not Taking Credit Seriously

Your early 20s is definitely the time for you to take credit seriously. This will shape many things for your future.

One resource that I really recommend getting is the Broke Millennial book – everything you need to know about credit is there.

4) Not Having Any Emergency Fund

This is the first thing you’ll need to work at. It will help you avoid credit card debt and really give you a money cushion when you’re in a tight place.

You can read more on my post here – everything you need to know about emergency fund.

5) Not Getting Yourself Insured, Properly

Getting yourself insured properly is to me, more important than your emergency fund. Because it will absorb the kind of emergencies that emergency fund cannot handle.

It really depends on your situation on what kind of insurance you will need, based on your lifestyle and demographic.

If you’re like me, single with no dependants, then I would look into 2 things first – which are capital protection/preservation as well as medical insurance.

What Can I Do With My Money In My 20s?

money mistakes to avoid in your 20s

If you’ve avoided those major money mistakes, well first thing first, congratulations! 😊

You can definitely read my post on the investments I’ve done in my 20s here to learn more.

I really recommend reading more when it comes to your personal finance success. Books are a great resource that you can learn from.

Here’s my top personal finance books list.

But if you’re still in your 20s, you might want to grab these two book first:

I hope you enjoy my money rant so far.

If you do have your own money mistake you’d like to share, feel free to share them below with me 😊

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