5 BIG Money Mistakes We All Make In Our 20s + How To Avoid Them

Written by Anuva Kakkar


If you are wondering why I am starting this article by congratulating you then let me tell you something - 80% of millennials are not concerned about their money because they are too busy wasting it. If you are here, then it is pretty obvious that you care about the money you earn and hence, congratulations, you stand apart.

For the majority of us, 20 something is a perfect age with lesser responsibilities and more freedom. At this age, you find yourself travelling to different locations, eating out in fancy restaurants, partying with your colleagues or significant others and the most important, receiving your first paycheck.

Along with all the fun 20s comes with, the truth is that it is also an age when you are dealing with finances completely on your own for the first time and there's a high probability that you make some major mistakes.

Therefore, this article is vital to you. Read it in and out and make sure that you take the most out of this piece of information curated for you.

#1. Showing your back to the investment

The 20s is the perfect age to dive into the pool of investments. Why? Because you are in a position to take higher risks and invest in equity. Moreover, you are capable of doing experiments and learning by burning some money yourself. On the other hand, if you invest now for the long-term, you can choose to retire early or make enough money by the time you retire.

You must have heard of this famous quote by Warren Buffet “If you don’t find a way to make money while you sleep, you will work until you die.” Through investments, you can make money while chilling, resting and sleeping.

Well, I know, you are aware of the importance of investments, but you are so overwhelmed that you haven’t started one till date. Every time you think of investing, you get diverted and if this will keep going then soon, you will be sharing the money mistakes you made in the 20s to your younger ones.

How to fix this:

  • First of all, devote one complete day to read about investments - types of it, which is better for you, etc.

  • Must-read about mutual funds if you’re just beginning with investments.

  • If you are too confused, talk to someone who is experienced or find yourself a consultant or a broker online. If you don’t want to pay a broker or consulting fee, reach out to significant people on Linkedin and ask your doubts politely, this works.

  • After you have tried everything, go ahead with the most suitable investment option. I suggest starting with multiple SIP. Don’t overthink, just start with one and learn over time.

  • Once you become mature with mutual fund investments, you can go ahead with investing in the stock market, land, property or anything else depending upon your budget.

  • Most importantly, surround yourself with people who believe in investing their hard-earned money.

Bonus point: Don’t make a mistake of being happy and relaxed by keeping your money in the savings account with low-interest rates for a long-term. This will merely make you believe that you are saving money, but it’s a loss for you and your long-term wealth.

#2. Using money to show off and NOT making need-based purchases

When we spend most of our time scrolling through social media, it is natural to face comparisons inside the head. It gets easy to fall in the showoff trap and if you are in the 20s, it is easier to get into it, badly. You might end up making big, random and irrational purchases just for the sake of showing them off on social media.

How to fix this: Exercise self-discipline and know that your worth is not dependent upon the thing you buy or have. You have to realise that life is not social media. Your coolness is not dependent upon the things you put on a story or post on online platforms.

Moreover, if you feel trapped, talk to someone maturer than you. Trust me, when there’s no solution, having a chat with an experienced person can make a notable difference.

#3. Indulging in impulsive purchases

In simple words, an impulsive purchase is an act of buying an item that you weren’t planning to buy in advance. Example: You went to a shopping store to get yourself a casual t-shirt, but you saw a gorgeous dress wrapped on a model and you fell in love with it, so you bought the dress in order to satisfy your instant gratification. I know you have experienced this several times. Don’t lie to yourself.

To meet the expectations of the digital world, let me share another example: While working on your old laptop, one day you saw the launch of a new fancy laptop, let’s say - 13" Macbook pro, the design & feature attracted you and therein, you decided to purchase it without a pre-plan.

Now how will you go ahead with the payment? Most probably, you will go with the easy financing i.e an EMI option. Right? So it means you will also end up giving some interest on EMI. Let’s say, the laptop is 1,22,990 INR with an EMI @7%. In this case, you will have to pay 10,966 (including interest) every month for the laptop purchased instead of 10,250. It simply means you’re at a loss of 716 INR every month. Overall, it’s a loss of 8,599 in a year.

How to fix this: Now, instead of making an impulsive purchase and paying EMI with interest, you can pre-plan the purchase, save for it and invest the money for the short-term. Once the investments mature, you can make the purchase and save the interest amount which you will earn on your investment.

Well, this is just an example to make you understand that you can save a lot more with pre-planned purchases.

#4. Taking an education loan

Many of you might have higher educational plans which require a big fat payment to the college. Student education loans might sound okay when you take them, but after completing your studies, it takes years to repay the amount and in all those years, you are missing out on savings and investments.

Do you know: Educational loans come with ridiculous interest rates.

How to fix this: Before planning to pursue any course or degree after graduation, be 100% sure that it will assist you in leading the path to your desired career. Ask yourself the following questions:

  • Is this educational degree will teach me a skill which I cannot learn while working?

  • Why do I want to do this? Is it the degree which excites me or some other perks?

  • Is there a replacement of the degree available in the market in the form of a diploma course or anything else?

  • Is it going to land me a job where I will be able to afford the repayment of the loan or not?

  • Is it worth the money?

And even after all these questions, your answer is to pursue higher education then what you can do is:

  • Look for a scholarship: One of the benefits of a scholarship is that it works as financial aid and makes college affordable.

  • Work remotely or part-time along with your degree course.

#5. Staying at a bad job

In the 20s, we enter into our first job and the excitement of earning money is at the peak. This is the first time we are experiencing financial freedom and independence and this feeling is adorable. However, many millennials feel stuck and depressed at their job, but they are so afraid to quit it because they are making good money. (Well, when you make money, stress is obvious, but we must know the limit of it.)

On the other hand, many millennials are underpaid and they are afraid to quit because “what if I don’t get anything better” or “what if I deserve to be underpaid”? The imposter syndrome is real, but don’t let it trip over you.

How to fix this:

  • The fix for this one depends upon the skills. If moving into the other job requires different or higher skills, learn them after your office hours.

  • If the economy is bad, don’t just impulsively leave the job rather start the side hustle or learn a skill so that you are sure that you never have to sleep without food.

  • The other fix is exploring and talking to people from the same industry.

Well, apart from all the points mentioned above, I am sharing a few others in order to assist you better. I took this question to my Linkedin and asked people in my network about their opinion on big money mistakes most of us make in our 20's.

Sharing a few most solid insights I received on the post wherein people mentioned the mistakes they made and the learnings they gained.

  1. I rolled my eyes at retirement planning when I was in my 20s and I believe that’s the major money mistake I made.

  2. The biggest mistake I did was to not invest my major percentage of monthly income.

  3. A 20-year-old girl replied: Spending on luxurious purchases which are meaningless in future can be the biggest money mistake one can do in the early years of career.

  4. Keeping money in the savings account at lower rates is a ridiculous mistake anyone can make in life.

  5. The money blunder I did was when I spent everything I earned for a few years of my career. To fix it, I believe one must have two accounts: one for expenses and others for keeping the savings.

That’s it for this article. Wish you all the best. Remember to make wise decisions with your money!


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