How to Fix the Biggest Money Mistakes Made in Your 20s

When you are in your 20s, it is a time when you are adjusting to a lot of new things. When you start a new job or start paying bills yourself, you may have a few money misconceptions, run into a few problems, and make some financial mistakes. Here are seven of the most common financial mistakes that people make in their 20s and ways to solve them. 

01 of 07

Student Loan Debt

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Student loan debt is one of the things holding many people back from buying a home or saving money. You cannot go back and not borrow the money, but it is important to have a plan for how to deal with your student loans. If you are still in college, ​borrow as little as you can and get by. This means you will likely need a job while you are in college.

Fix: Once you graduate, see if you qualify for a student loan forgiveness program or consider working for AmeriCorps. You should make your student loan debt a part of your debt payment plan and work on paying it off so you can use that money to reach your other goals.


If you do qualify for student loan forgiveness, you'll get even more help because forgiven student loan debt is tax-free through 2025.

02 of 07

Credit Card Debt

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It is common for college students to rack up credit card debt while in school or rely on credit cards too much when they are trying to make it between college and their first job.

Fix: The first step is to stop using your credit cards immediately. Then you need to set up a budget and a debt payment plan that allows you to pay extra on the cards so you can get out of debt and stop paying high amounts of interest.

03 of 07

Skipping Retirement Savings

Older person putting coins into piggy bank
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When you are struggling to get out of debt and to make ends meet, it can be tempting to stop retirement contributions. However, the money you invest in your 20s can really begin to work for you over the years. If you start a habit of investing a good amount now, you will be able to save enough for retirement.

Fix: If you are still in debt, you may want to contribute up to your employer’s match. After you are out of debt, work on getting that number up to 15 percent of your income each year.

Start by increasing the amount you contribute with each of your annual raises, this way you will not miss the money. Consider cutting back on entertainment expenses to help find extra money for retirement. 

04 of 07

Going Uninsured

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It is costly to go without insurance. Legally, you need to carry car insurance and health insurance in some states and failing to carry either can cost you in fines. It only takes one accident or emergency surgery to put yourself thousands of dollars in debt due to medical bills. It is important to carry adequate coverage to protect yourself from this.

Fix: If insurance seems too steep for you, try looking for a high deductible health insurance plan. The monthly premiums are lower, but it will cover any catastrophic medical bills and help you avoid the fees you will incur from carrying no insurance at all.

You may also want to look for a job that offers health insurance to employees that work part-time, and get a job there to cover insurance if you are a student or you work as an independent contractor.

05 of 07

No Savings

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Savings provides you with a safety net. It also helps you move forward to the next step. When you have no savings, you lack the ability to deal with emergency expenses. Saving money can help you stop living in fear.

Fix: Start by saving up an emergency fund of one month’s wages before you work on getting out of debt or anything else. This will be your emergency fund while you work on your debt.

Once you have paid down your debt, work on saving a year’s worth of expenses, and then make other savings goals, like a down payment.

If you need to find extra money to save, consider cutting your monthly bills, and cutting back on other ways that you spend money to help you get ahead more quickly.

06 of 07

No Financial Plan/Goals

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If you don’t have a plan, then it is difficult to know what to do with your money. You will flounder when it comes to saving, buying a house, and getting out of debt. It is important to have clear goals so you can reach them. It takes work and planning to be successful financially. If you find yourself running out of money each month, you will also need a budget.

Fix: Set up an effective financial plan that includes both short and long-term goals. You can plan for things like purchasing a house, finding your dream job, and your retirement.

The more detailed your plan, the better. If it feels like too much pressure, remember that you can change things if you need to or if your goals change.

Working on one plan will help you even if you change to a different plan. Once you have your plan, you can use it to create a solid budget that will help you reach your goals. 

07 of 07

Staying at a Bad Job

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You may justify staying at a bad job during a bad economy or because there are not many jobs to choose from in your area. A bad job can affect you negatively in a lot of ways. If you are underemployed, it can make it difficult to reach your goals, and you may end up in a lot of debt. 

If it is a negative work environment, it can make you depressed, and it can be difficult to be positive in a difficult situation. Although you may decide you need to stay for another year, you should be committed to moving on.

Fix: This fix depends on why you have the job. It may include going back to school so you have the skills to move on to the next job. It may mean widening your job search to different areas or fields so you can find something that works for you. 

The key is to realize that you do not have to stay at your current job, and if you are not being paid enough or if the job is truly miserable, you owe it to yourself to start looking for something new right away. 

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The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. "The American Rescue Plan Act of 2021," Page 182.

  2. Nationwide. "Car Insurance Laws by State."

  3. "The Fee for not Having Health Insurance."

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