4 money mistakes I made in my 20s that cost me thousands


Everyone makes mistakes, it’s only human. Personally, I made a lot of money-related missteps throughout my 20s. But I learned from them and have since made different choices in my 30s. Here are four financial mistakes I made in my 20s that cost me thousands of dollars, and what you can do to avoid them.

1. Don’t create an emergency fund sooner

An emergency fund is a powerful financial tool that can help you get out of stressful situations more easily. I didn’t have emergency funds until my late twenties. From car problems to unexpected vet bills, I’ve caused myself a lot of extra stress by not having emergency savings.

With no extra money set aside, I had to use my credit card for several major expenses. Fortunately, I knew the importance of paying off my card balance as much as possible. But I still incurred credit card debt because of the interest charges.

If you don’t have an emergency fund, I invite you to create one now. Even a small fund can come in handy when you need cash unexpectedly. Here’s how to get started:

  • Open a savings account separate from your usual bank account.
  • Automate your savings with weekly or monthly transfers.

Even if you can only afford to save $ 25 per week, it will add up. After one year, you will have saved $ 1,300. Use our emergency fund calculator to find out how much you should be saving.

2. Stay in low-paying, low-paying jobs (which I hated!)

I guess most people had jobs they hated. In my twenties, I had more than one job like this. They all had the same issues in common: low pay and little to no benefits – and they had no personal interest in me.

If I had changed jobs earlier, I could have made more money and improved my quality of life. I’ve been a freelance writer for over five years now, and it’s one of the best decisions I’ve made. While self-employment is not for everyone, it is for me.

Now I look forward to the work I am doing. And I control my earning potential – I can take on more or less work as needed. I also control my schedule and, in doing so, I choose to prioritize travel and time spent with family.

When you have bills to pay, you might have to stay in a job you don’t like. But don’t stay there forever if you can help it. Maybe there’s a class or certification you can explore that can propel you into a job you’re best suited for. Don’t be afraid to do things differently from the norm. Finding a better fit with your career can improve your happiness, your mental health, and your financial situation.

3. Don’t Use Earlier Credit Card Rewards

I love credit card rewards. I now use multiple cards to earn rewards on my regular spending. But there was a time when I didn’t use this type of card at all.

I got my first credit card before I started college to learn how to build my credit. After a few years my hard work paid off and my credit was in great shape. At this point, I certainly could have been approved for a rewards card. Instead, I missed out on the chance to earn rewards on my groceries, takeout and restaurant purchases, and other life expenses. It’s hard to say exactly how much I lost, but I estimate that I could have earned at least $ 5,000 in rewards if I had started using rewards credit cards earlier.

4. Don’t Maximize My Roth IRA Contributions

This one hurts the most. I opened a Roth IRA account in my early twenties after graduating from college. At that point, I understood a little about the importance of saving for retirement. I also had some understanding of compound interest. By starting early, I was able to let my money grow faster over a longer period of time. But I wasn’t making a lot of money in my early twenties.

During the first few years, I couldn’t afford to maximize my contributions. But in my mid-20s, I should have adjusted my spending habits to make it work. I missed a lot of money growth by not contributing as much as possible. If I could go back and do it again, I would have maximized my contributions to meet annual contribution limits every year, even if that meant fewer fun evenings spent with friends.

Now I am maximizing my contributions to my Roth IRA and have done so throughout my 30s. But I estimate that my mistake cost me, at a minimum, $ 25,000. And that’s just the value of the contributions I haven’t made. It does not include potential interest growth. (Knowing that this number would upset me even more!)

Mistakes happen, especially with money. But we can learn from them and make smarter choices as our situations change. I write and read personal finance topics regularly, but I’m still learning. I adjust my financial habits based on the knowledge I have acquired, and you can too.

No matter where you are in your financial journey, I hope you can learn from my financial mistakes and prepare for greater financial success.

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