Our 20s are a momentous, almost magical coming-of-age decade in our short time on this planet. The transition into adulthood can be fun and empowering, but it can also be rocked with turbulence.

When you move away from home and you’re finally on your own, it can be hard enough to keep your eye on the present, let alone the future. Financial mismanagement is a common mistake young adults make – and the repercussions can be costly. Many 20-somethings make financial mistakes that can set them back years or even decades.

Here are the seven most common financial mistakes in your 20s and tips on how to avoid them:


You’ve graduated from college and you have your first “real” job. When that paycheck arrives, it can seem like Christmas. Your first instinct will be to spend, spend, spend … I mean, why not, it’s what your friends are doing. You’ve just worked a 40-hour week; you should reward yourself with a nice gift, right? Wrong. It’s paramount that you start saving in your 20s. Avoid the urge to throw money around or “show off” with big purchases that you’ll soon regret. If you ever want to own a home, or eventually retire from that awesome new job, a savings account that you started in your 20s may be your only hope.


You’ve applied and been approved for your first credit card. Congratulations, you are now on your way to building a credit history that will help you throughout the course of your entire life, from buying a car or a house to paying for your future children’s’ college education. But be careful, because reckless, unchecked spending on credit can have harmful, far-reaching consequences. The average 20-somethings’ credit score is a dismal 628, the lowest of any age group, and they carry $28,000 worth of debt, on average, according to credit reporting bureau Experian. But this can be avoided by simply forgoing credit cards entirely like 63% of millennials already do, according to U.S. News and World Report. If you do choose to use credit cards, keep your balances below 50% of the limit and pay your bills on time.


Dating different people is one of the most exciting aspects of your 20s, but it’s important to remember not to go overboard on those $10 martinis or $50-a-plate dinners. Finding a partner who shares your financial values is key to living a financially stable life, and you could be sending the wrong message while you’re trying to impress your date. And before you shell out tens of thousands of dollars for an engagement or even a wedding, think about how that money could be put to a use that’s more in line with your future goals. 


Get some sort of health insurance now. Whether it’s full-blown coverage or a high-deductible catastrophic plan, a medical emergency can be one of the most devastating financial blows you’ll ever experience. Mistaking youth with immortality is one of biggest blunders people in their 20s can make. Thanks to the Affordable Care Act, you can stay on your parent’s health insurance plan until you turn 26, but don’t drop the ball at that point.


Many relationships sour or end when money gets involved. Borrowing from friends or family is a slippery slope. If you need money, take on extra hours at work, find a second job or go to a bank for a loan, but avoid asking mom and dad or your best friend. It only spells trouble. Nobody said building financial independence would be easy.


This is a tough one, because it probably goes against what you’ve been taught. As kids we learn that the more expensive our college and the more degrees we get, the more successful we will be. While this can be true, without a clear path, you could just as easily be throwing that money away. Some look at student loans as a means to a better life, but that can be a dangerous road to travel. If you’re not sure what career path you want to take, take a year off or try community college first and then transfer to a four-year university when you’re ready. After your bachelor’s degree, get into the work force for a couple years before heading on to graduate school because you may find out that you don’t like the job for which you’ve been studying.


From the moment you accept your first job, you need to start saving for retirement, even if those golden years seem too far off to fathom. If you don’t start now, you’ll be so far behind you may never retire. Opening an IRA or 401(k), even if the initial contributions are small, will put you years ahead of your friends. Don’t rely on Social Security or the potential of a family inheritance. As Americans live longer and longer, it could be several decades before you see any inheritance and what exists now may not last that long.

...Now, these warnings are not meant to discourage you from having fun. You’re only experience your 20s once and you should live life to the fullest. But it’s possible to enjoy yourself and plan for the future at the same time. 

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