6 Money Mistakes To Avoid In Your 20’s

Your twenties will probably be one of the most exciting years of your life. You’ll gain more independence and freedom, make new friends, and travel. During this period, you’re also quite likely to start a full-time job, which implies that you’ll have more disposable income. This is a good thing, however, it also means that you’re more likely to make mistakes when dealing with your finances for the first time. So just to save you from having to learn the hard way, here is a list of 5 money traps to avoid in your twenties.

Spending too much money on rent

Unfortunately, it has become more expensive to rent over the past few years, and the current interest rate increases have not made things any better. Sadly a lot of young professionals tend to overspend on their rent. Before you start looking for a room or a flat, you should make a budget plan and figure out how much you’re willing to spend on rent. Bear in mind that your gross wage and take-home pay will significantly differ; for instance, if you make £32,000 a year, you’ll take home £2,128. Ideally, you want to spend no more than 1/3 of your take-home pay on rent. Thus, if you make £32,000, try to spend no more than roughly £710 on rent.

Not having an emergency fund

It’s easy to feel like nothing bad is going to happen to you, especially in your twenties. You’ve just moved to a major city for a new job, you’re making friends, you’re making money, you’re excited and you’re enjoying your job. This might make you feel like nothing can go wrong, but ultimately, you never know what might happen. You could lose your job, have unexpected medical expenses to cover or your landlord could randomly bump up your rent by £500. It’s important to have at least 3 to 6 months of expenses ready in case of an emergency

Buying a new car

Buying a new car is probably one of the worst financial decisions you can make. It’s a depreciating asset that will lose 10% of its value as soon as it’s driven off the lot. If you absolutely need a vehicle to commute daily, you’ll still be better off buying a car that’s a few years old. Ultimately a car is just there to take you from a point A to a point B, and since it’s going to lose most of its value, buying it new might not work in your favour. Moreover, the typical new car repayments are between £300 and £400 and most contracts run from 36 to 60 months in the UK. This means that you’ll be bound to make those repayments for at least three years.

Spending to impress others

Buying unnecessary items to impress people is detrimental to both your finances and your mental health. You shouldn’t spend money to get validation as no matter what you do, material things will only make the problem worse. I have a friend who bought a new car because their coworkers made fun of the car they drove. Although people were impressed by the new car, it only lasted a few days and my friend still had to make the car payments years after and didn’t necessarily feel better. Instead of spending to impress others, you must learn to be content with yourself and spend money on experiences rather than material things.

Not having a budget

Knowing where your money is going is much more important than you think. It’s easy to feel like you’ve got enough money and lose track of your finances. A lot of people learn this the hard way when their card gets declined. Setting a budget will give you a better idea of your cash flow and help you become more responsible with your finances. It’s good practice to categorise and check your outgoings at the end of each month to get a better idea of your spending habits and where you can cut back.

Not investing in yourself

A lot of people fail to realise that not investing in yourself when you can, is a financial mistake. If you have enough disposable income, investing your time and money to increase your earning capacity is one of the best things you can do. I personally know someone who did an online Bootcamp and doubled their income within 2 years. There are hundreds of resources online or books you can buy to learn new skills and develop yourself. Instead of saving money to invest in assets, you should remember to also invest in one of the best assets which is yourself, and increase your earning potential.


Having to deal with your finances in your twenties can be overwhelming, and whether you want it or not you’ll probably still make financial mistakes that you might regret in the future. However, as long as you have a budget, do your best to stick to it, and ask yourself whether you genuinely need something before buying it, you should be alright. Ultimately, remember to enjoy yourself as your twenties are supposed to be some of the best years of your life so don’t miss out on good experiences and opportunities.

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