8 Financial Mistakes People Make in their 20s and 30s (and How You Can Avoid Them) 

If you are like many people in their 20’s and 30’s, you are just beginning to settle into your role as an adult. You may think that planning for your financial future is something that can wait. You tell yourself you will think about it after you start a relationship or get your degree or land that dream job.

The truth is, not thinking about your finances when you are younger can set the tone for your financial health for the rest of your life. You do not want to be at your retirement party regretting the decisions you made when you thought you had all the time in the world.

It is not too late. Avoid these 8 financial pitfalls in your 20’s and 30’s and you will be on the road to a financially healthy future:

1. Failing to Create Financial Goals

Perhaps it is fear of the unknown, lack of time, or simply not knowing how to get started that prevents young adults from thinking about where they are and where they want to be 10 years from now.

Not having a financial goal is like trying to drive your car to an unknown destination without a map. You won’t get there no matter how far or how fast you drive.

Setting some realistic and achievable goals will help you focus on where you want to be and provide you with a roadmap of steps you need to take to get you there.

Related Post: The 9-Step Recipe for a Successful Investing/Trading Plan

2. Amassing Credit Card Debt

Credit cards are easy to get. Sign on the dotted line and you have a piece of plastic that can buy you instant gratification. That is until the bill arrives.

Unless you can pay off your balance right away, you are going to find yourself in financial quicksand desperately trying to pull yourself out of debt. Late fees, finance charges and interest will pull you under before you know it. If your debt gets high enough, you might find yourself amongst the 35 and under crowd whose credit card debt accounts for 49% of personal bankruptcies.

Before you sign up for that new credit card, think about whether you really need it. Do you have the cash to pay off the balance right away? If not, don’t charge it.

If you find yourself with credit card debt, make paying it off a priority. The longer it takes you to pay off the debt, the more money you will end up paying in interest.

3. Not Creating an Emergency Fund

When you are young, you tend to think that you are invincible or that it “won’t happen to me”. Unfortunately, it can happen and it does. Health issues, unemployment and the unexpected curve balls life throws at us can happen at any age.

Not having available cash will most likely force you to pull out your credit card to get yourself out of hot water. If you have been paying attention, not only will you be in hot water, that water just got deeper.

It is highly recommended that you maintain at least 6 months’ worth of living expenses in a high-interest online savings account. This account should only be used in the event of a true emergency.

4. Purchasing an Expensive Vehicle

How many of us have had fantasies of driving down the open road in a brand new car, wind in our hair with our favorite song playing on the radio?

While it may be enticing to buy that car, this could turn out to be a big mistake. Once you drive that shiny new car off the lot, its value begins to depreciate and the cost of keeping it running will generally cost more than travelling via public transportation.

Imagine what would happen if you invested $10,000 in a fund rather than a car. By the time you retire, even if you had only modest returns, your net worth could increase by hundreds of thousands of dollars! No car will do that for you.

5. Avoiding Discussions about Finances before Getting Married

If you are already married or plan to get married in the future and you have not had this conversation, consider this – the top reason why people divorce is money.

It is not an easy or comfortable conversation for most, but your chances of staying together and being happy are much greater if you do.

Take this important step and talk about your financial situation. Make sure to work together to set goals, create a plan for savings and talk about spending with your significant other.

What I find with couples is that one person generally has a higher or lower risk tolerance than the other. For this reason, I also encourage both parties to learn about investing and make decisions together – that way, each person feels comfortable with the strategy.

You will both be glad you did.

6. Overspending on Your Wedding

Hopefully, before you reached this point you had the discussion mentioned in the point above.

While fairy tale weddings are beautiful and memorable, the bottom line is, you will be starting your life together with a large amount of debt.

A 2014 study of 3,000 people found that men who spent $2,000 to $4,000 on engagement rings were 30% more likely to end up divorced than those who spent $500 to $2,000, after controlling for demographic factors. Women whose weddings cost $20,000 or more were 3.5 times more likely to end up divorced than those who spent $5,000 to $10,000.

Why not have a less expensive wedding and invest in your happy future together?

7. Buying a House that is Larger than You Need

Becoming a property owner is often a smart way to invest for the future. However, it is important to be smart about the property you choose to buy.

If you make the right choice, you can make a lot off your investment. If you buy a more expensive house than you need, there will be many needless maintenance costs, not to mention stress. Also, take into consideration that while the right home can be a good investment, there is always the risk of property prices declining as it did in 2007-2009.

Pay attention to your opportunity costs and consider a more diverse portfolio that includes other growth assets.

8. Not Preparing Financially for your Retirement

When you are in your 20’s and 30’s, retirement can seem to be far off into the distance and it is easy to put off thinking about planning.

Ask anyone that is currently retiring and it is likely that they thought the same thing when they were younger. However, they will also tell you that it seemed to have happened in the blink of an eye.

The time to start planning is now. Your future standard of living depends upon it. Start doing the work now by saving and investing smartly and you will reap the benefits of compound interest when it is your time to retire.


Making smart financial decisions in your 20s and 30s is key to a happy, debt-free future.

While there are never guarantee’s in life, avoiding these eight common mistakes is going to increase your chances of living in a debt-free (or low-debt), less stressful and happier future. It is never too early to start on your road to financial health.

If you are already making some of these errors, it is not too late to course correct. Start saving and investing today for a comfortable retirement tomorrow!


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