Updated: May 19, 2024

9 Bad Money Decisions Often Made in Your 20s

Check out the following list of bad money decisions that 20-somethings often make and how to avoid it.
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Now that I’m in my mid-twenties, it’s very apparent what financial mistakes my friends and I have made over the years.

It’s gotten to a point where I consistently see a variety of bad decisions being made among my peers. If you’re in your twenties, I think you can agree we’ve all made at least one of these decisions we probably shouldn’t have.

Check out the following list of bad money decisions that 20-somethings often make.

1. Charging everything

This may be the worst decision that 20-somethings make. People tend to think credit cards are free money and charge way more than they can actually afford, causing thousands of dollars in debt.

I once overheard a girl in her 20s telling a friend how she is $70,000 in credit card debt from buying clothes! She better have the best wardrobe in the world because those clothes may have to last her a while once she figures out her finances.

Avoid using credit for everything, even if you're racking up miles or points. You may have a free roundtrip ticket waiting for you, but it wouldn't make sense to go anywhere, especially if you're facing a mountain of debt.

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2. Renting too soon

Living at home after graduating college can be extremely helpful when it comes to saving money.

Of course most people want to move out of their house as soon as possible, but having to pay rent is a huge responsibility.

If you happen to work near your home, it can be extremely beneficial to move in with the folks for a while and save some dough.

Believe it or not, the average cost of rent per month in the country ranges from $571 in Oklahoma City to $3,017 in Manhattan.

That’s a pretty big range, but regardless, if you choose to live at home for even a year, you could be saving anywhere from $6,852 to $36,206 a year!

3. Paying off too much of your student loans, or not enough

Sometimes 20-somethings rush to pay off their student loans, which may seem like a great idea in theory, but in reality, it can actually be a bad decision. You can adjust your loan payments in accordance to your income.

Alternatively, just putting off your loan payments and deferring or not paying at all is also a bad decision.

If your monthly loan payments are too difficult to manage, consider refinancing your student loans, to get a better interest rate and lower minimum payments. 

4. Spending without a budget

Spending money without taking note of your budget, is a notion 20-somethings are all too familiar with. It’s very helpful to start noticing how much of your money goes where -- and especially, how much of your money is going towards frivolous spending.

If you charge the majority of your expenses, most credit card companies take out the guesswork for you and have options online in which they categorize your spending, making it easy to see what you spend the most on.

I highly recommend checking out your expenses when you have time, it’s eye-opening once you see the stats of your spending. If you don't use credit cards on a regular basis, you can simply look at your transactions online.

5. Buying alcohol

Whether you’re buying alcohol at a bar, liquor store, restaurant, or for a girl on a date, you’re probably spending too much.

Buying excessive amounts of alcohol is a really bad money decision 20-somethings make.

Of course, it’s fun to go out and drink with friends, but it’s very easy to get carried away, especially since most bars ask for a credit card to keep the tab open.

It's easy to just tell the bartender to charge the card, or reply "yes" when asked if you want it charged on the card.

It’s hard enough to not overspend on purchases when you’re sober, let alone when you're buzzed and feeling extra generous and happy.

Spending too much on alcohol is usually something people regret the next day. I’ve never heard anyone say, “I’m so happy I spent all of that money on alcohol last night!”

If you know you're in for a big night with friends, just bring cash and leave the cards at home.

6. Identity theft won’t happen to you

Twenty-somethings love online shopping. It’s so quick and easy, but also dangerous. Roughly 11 million fall victim to identity theft annually, and guess which age range is in the highest percentage?

If you're on a site where you have to enter financial information, make sure the web address has "https" (Hypertext Transfer Protocol Secure) in the beginning of the URL. If it just reads "http," your information is not secure.

ATMs are also something to be aware of. I once withdrew money from an ATM at a gas station. In less than 24 hours, purchases were made on my card. After speaking with my bank, they explained to me how “skimmers” are placed inside card-readers on ATMs that copy your information.

Don’t worry, you can avoid this from happening! The best way to make sure this doesn’t happen is to be cautious.

Check the card reader to see if it looks rickety. If you're at your bank, be sure to cover one hand while entering your pin, as some sophisticated scammers are implementing tiny camera to capture your pin numbers.

7. Not reading leases/contracts

If you are renting an apartment, starting a job, or even joining a gym, it’s very important to read the fine print and finding out about hidden fees. Most 20-somethings don’t take the time to read over these agreements carefully which can lead to a bad money-wasting decision.

8. Taking extravagant vacations

We’re all familiar with the phrase: “work hard, play hard." Well, some people play hard even if they don’t work hard, which ultimately leads to this bad money decision.

Many 20-somethings are taking vacations and spending more than they may realize. Lately, popular vacation spots have been offering cheap hotel rates in order to win you over.

While you think you’re getting a steal, you actually end up spending way more while you’re there because you may not take into consideration things like food, drinks, activities, cab/transportation fares, hotel fees, and more.

9. Not having a savings account and living paycheck to paycheck

This is a very common bad money decision 20-somethings make. A lot of people don’t plan ahead or think of their future finances.

It’s so important to save anything you can from each paycheck. Even if you were to save your spare change or even just a dollar every day, that’s $365 extra you’d have at the end of the year.

The most important thing for any person to have (especially 20-somethings) is an emergency fund.

Emergency funds are separate accounts specifically set up for those unforeseen expenses you might encounter. Broken down car, unexpected college course fees, medical bills, you name it -- your emergency fund can help you out.