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10 money mistakes to avoid in your 20s

Entering your twenties is like opening a door to a world of possibilities. It’s a time of excitement, growth, and figuring things out.

Amidst figuring things out, it’s also a crucial period for building a strong financial foundation. This foundation is what sets you up for a more secure future. 

All of us strive to achieve financial independence, however, as young adults we make money mistakes that can have long-lasting consequences. 

In this blog, we’ll explore the top 10 money mistakes to avoid in your 20s and provide tips on how to navigate these pitfalls. 

1. Neglecting to Budget

One of the most common money mistakes is not making a budget and sticking to it. When you don’t know where your money is going, it’s easy to spend too much and get into debt.

To avoid this, start by keeping track of how much money you get and how much you spend. Decide how much of your money should go to important things like housing, food, transportation, and bills.


Remember to also put some money into savings and investments. You can use budgeting apps to help you with this.


For instance, think about if you’re spending a lot of money on eating out. When you look at your spending, you might see that you could save money by cooking at home more. You can then take the money you save and put it into an emergency fund.

2. Accumulating High-Interest Debt

Credit cards can be really handy, but if you’re not careful, they can get you into a lot of expensive debt.

To avoid this, only buy things with your credit card that you can pay for completely when the month ends. If you don’t, the debt can grow quickly and make it hard for you to reach your money goals. Be mindful of credit card spending.

It is no pro tip, but logical advice that if you do have credit card debt, try to pay it off quickly. This will help you have more money for other things you want to do.

For example, imagine you buy an expensive gadget using a credit card and only pay a small amount each month. As time goes on, you’ll end up paying a lot more than the gadget’s original cost because of the extra money you owe from interest.

3. Ignoring the Emergency Fund

Life can bring surprises, and sometimes they cost money. Not having money set aside for emergencies can lead to stress and more debt.

Try to save enough money to cover your living costs for three to six months to build an emergency fund. Keep this money where you can easily get to it.

This fund is like a safety blanket for tough times, such as losing your job or needing medical help.

For example, if your work laptop breaks or you get unexpected medical bills, having an emergency fund can help you handle these costs without too much worry. This also keeps your money plans on track.

4. Overlooking Retirement Savings

Creating a dedicated savings fund is essential for achieving your financial goals. While retirement might seem distant in your twenties, it’s the ideal time to start saving. 

Thanks to the power of compound interest, even small contributions can grow significantly over time. 

The earlier you start your retirement planning, the more time your investments have to grow, making it easier to achieve long-term financial security.

Example: If you start contributing to a retirement fund in your early twenties, even small monthly deposits can accumulate into a substantial nest egg. By the time you retire, thanks to the compounding effect, you’ll have a good amount saved.

5. Not Investing

Investing might seem intimidating, but avoiding it altogether is a missed opportunity for wealth building. 

In your 20s, you have the advantage of time, which can offset the risks associated with investing. So, stop telling yourself you’ll do it later and start investing. Make money decisions that help you in building wealth.

Educate yourself about different investment options and asset classes, such as stocks, bonds, and mutual funds. Starting a systematic investment plan is the best step you can take to start you investment journey.

Consider seeking advice from financial professionals to get you started. 

Example: Suppose you invest ₹5,000 a month in a diversified portfolio during your twenties. It has the potential to generate considerably greater returns over time, in comparison to keeping your funds in a normal savings account.

6. Living Beyond Your Means

Sometimes, friends and what society expects can make you spend too much on stuff like clothes, gadgets, and fun things. That’s the common “buy now pay later mindset”.

You need to know what you really need and what you just want. It’s okay to treat yourself to guilty pleasures sometimes, but always spending more than you can afford can make your money situation shaky. You wouldn’t want your hard earned money to be spent recklessly.

Try to be smart about spending and think about what you really care about and want in the long run. For instance, instead of buying expensive clothes without thinking, think about saving money for trips or learning new things.

7. Failing to Negotiate

Whether it’s your salary, a job offer, or a contract, failing to negotiate can mean leaving money on the table. Research the market rates for your position and be prepared to advocate for yourself. Negotiating not only boosts your immediate earnings but can also have a compounding effect on your overall income throughout your career.

Example: Imagine you’re offered a job that pays ₹3,50,000 at the start. But with some good negotiation, you manage to get a small raise to ₹3,75,000. This doesn’t just give you an extra ₹25,000 every year, it also helps you start with a better salary that can lead to even more raises and better positions in the future.

8. Not Building Marketable Skills

Investing in your education and skill development can significantly impact your earning potential. In your 20s, focus on acquiring skills that are in demand in the job market.

This could involve formal education, online courses, or self-paced learning. Continuously upgrading your skills makes you more valuable to employers and opens up opportunities for higher-paying positions.

Example: If you work in the tech industry, learning programming languages or data analysis skills can make you a more competitive candidate for higher-paying roles in the future.

9. Disregarding Insurance Needs

Health, auto, and renters’ insurance might not be the most exciting topics, but they are essential for protecting your finances. Disregarding insurance is also one of the most common financial mistakes.

It is a harsh reality that medical emergencies, unexpected illness, accidents, or unexpected damages can lead to significant expenses.

Having the right insurance coverage ensures that you’re financially prepared for these situations and prevents a single event from derailing your progress.

Example: Imagine a scenario where your apartment is burglarized, and your valuable possessions are stolen. With renters’ insurance, you can recover the value of those items, preventing a significant financial setback.

10. Not Seeking Professional Financial Advice

Navigating the complexities of personal finance can be overwhelming, especially when you’re just starting out. 

Seeking guidance from a certified personal finance expert can provide you with a roadmap for achieving your financial goals.  

They can help you create a personalized plan, optimize your investments, and address any concerns you might have.

An expert advisor will also understand your risk tolerance, create a well-balanced investment portfolio, and provide guidance on when to buy or sell. 

At Vittae, our experts will help you with a personalized financial plan and guide you on how you can achieve your financial goals. 

Conclusion

Your twenties are a critical time for establishing healthy financial habits that can have a lasting impact on your future. 

By avoiding these common money mistakes, you can pave the way for financial stability, freedom, and success. 

Remember to budget wisely, manage debt responsibly, save for emergencies and retirement, invest for growth, and continuously improve your financial literacy.

With the right mindset and strategies, you can set yourself up for a prosperous financial future.

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