Between 20 and 30 years old, you experience dozens of life changes. From graduating college, to figuring out your place in the world, there are crucial turning points that can have rippling effects long into the rest of your life. And your financial choices are one of them. Whether you’re carrying a load of college debt or looking to reach big money milestones, the money mistakes you make during this decade will follow you for years to come. Learn the five common poor spending choices people make in their 20s and how to avoid the same fate.


1. Delaying Retirement Savings

For a lot of us, saving for retirement beginning in our 20s seems like a wasteful thing to do. After all, we have bills to pay and a life to start, all on a meager income. “Saving what money?” is often the mentality. Most of us don’t think we need to worry about it until around 29 years old. But here’s the truth: Start saving for retirement now, and you’re only looking at putting aside around 20 percent of your paycheck. Wait a while, and you’ll have to triple that - something that is not doable for most.

Consider, too, the rainy-day fund you will be building by putting money into savings - whether that’s strictly for retirement or can double as an emergency safety net. This fund can potentially help you towards costly items like a house or provide a comfortable cushion should you find yourself out of a job or strapped with medical bills.

So, where should you put the money you save? Well, the experts say: Diversify. Put some into your company sponsored 401(k) because most companies, more than 70 percent, will match up to a certain percentage. That’s free money, folks. The other upside to a 401(k) is that the contributions are tax-free; just remember that when it’s time to withdraw the money, it will be taxed then.

Another option to focus on is a personal Roth IRA. These types of retirement accounts aren’t taxed when you withdraw from them, but the money contributed has already been taxed, so it’s a balanced supplement to a 401(k).

Here’s the thing, though. It’s expensive and/or difficult to easily access the money from your 401(k) and IRA if you are in a time of need - so it’s also important to look at more easily accessible savings accounts to stash rainy day money away. All in all, putting that 20 percent savings towards all three, 401(k), IRA, and personal savings, will ensure you are stashing for both the near future and long term.


2. Not Paying Towards Your Debt

When you graduate college and start out in the real world, life can sometimes smack you in the face. Your first job doesn’t pay as much as you hoped. Your rent is higher than you planned. And eating out is adding up. But it doesn’t stop there, especially when you’re looking towards the future to buy that new house and own that new car.

This mentality is why people under 35 are in an average of around $67,000 worth of debt. Most of that goes towards their education, housing, and vehicle. And because these cash-strapped 20-somethings don’t have much to put towards their debt, interest rates from loan extensions and making minimum payments adds up into the thousands.

It can be tempting to brush your debt to the side, but if the pile becomes big enough, you could drown in it. Use your youth to pay down your debt now, before you begin the next phase of your life - like having kids.


3. Living Beyond Your Means

In the Insta-glam world we live in, it’s easy to contract a case of the FOMOs (fear of missing out). And let’s face it, going from relying on your parents to relying on yourself takes adjusting to a new lifestyle. No matter what your reasons are for spending, it can quickly become too easy to overspend.

So how do you know if you are overspending? There are a few clear-cut signs to look for:

  • You have a low credit score. It isn’t uncommon for young people in their 20s to have a lower score, as they’re usually just starting out building their credit. But as you creep towards 30, that credit score should be creeping up, as well. If it’s not, that’s a clear sign that you’re not paying your bills on time or at all, leading to negative impacts on your score.
  • You are paying way too much for housing. A good indicator that you’re overspending in the housing arena is when your housing costs take up 30 percent or more of your paycheck. Whether you’re renting or you’re one of the lucky few 20-somethings that can afford a down payment on a house, if expenses including rent or mortgage, insurance, and taxes are beyond that 30 percent threshold, you might need to scale back.
  • You’re unable to save. We have all felt the paycheck crunch, especially as we get our first real jobs. But being unable to put even a little bit away each month is a clear sign of living beyond your means.

It’s a hard lesson to learn, but curbing your lifestyle by making adjustments to food purchases, clothing, entertainment, and electronics will go a long way in helping you avoid money mistakes common during this decade. Creating and sticking to a monthly budget will help you do just that.


4. Overspending on Big Ticket Items

You’ve made it through college and landed your first job. Rewarding yourself with those big milestone possessions to prove you’ve “made it” can be very tempting. Whether that’s a car, a house, or traveling to exotic places, when the bill comes due, you may not be able to cough up the cash.

Despite the fact that the average college grad nets a smidge under $50,000 a year  starting out, overspending on big ticket items can have a lasting impact. This is especially true for the travelers, who, in this generation, are 23 percent more likely to make it a priority than previous generations. In fact, this generation is the fastest growing segment in travel spending.

While we’re not suggesting you just stay home, there’s a balance to be found when making these costly purchases. That starts with prioritizing what is important to you. Do you want those nice wheels or those experiences to be had? Do you want the nice house or a nice wedding? Figure out what’s important to you, focus your spending in that area, and trim out the rest.


5. Not Building Your Net Worth

Are you aware of your net worth? It’s quick to figure out. Just add up your assets (everything you own outright), add up your liabilities (all that you still owe), and subtract your liabilities from your assets. That number in your 20s ends up being much closer to zero - or even in the negative. Doing this may cause you to sweat the debt. Before you go pouring every penny into lowering your liabilities, consider the other side of the equation: Increasing your net worth.

Here’s an example of the value of investing now, from Forbes:

“Let’s say you invest $300 per month starting at age 20 and don’t stop until you’re 60-years-old. If you managed an 8 percent return during that time, you would have more than $1 million dollars in that account alone. Now let’s say you waited until you were 30 to get started. By the time you reached 60-years-old, you would only have $440,445 in your account. Those first ten years you missed out on would cost you more than $550,000 in returns – even though you only skipped $36,000 and ten years of deposits!”

In just one decade, you’re missing out on over half a million dollars; that’s more than a little eye opening. Goes to show that paying yourself first offers major benefits in the long run.


When you’re just starting out in your 20s, it can be tough to get through the day with any cash left over. But by focusing on avoiding these money mistakes, such as putting towards your retirement, paying off debt, keeping your spending in check, and investing in yourself, you’ll set yourself up for a solid financial future. LendNationis here to help you get the cash you need any time with a title loan, installment loan, or payday loan online or in-store!