The 7 biggest money mistakes I made in my 20s

Author: Lyle Daly

Source: The Motley Fool

Like just about everyone, I made my fair share of money mistakes in my twenties. And of course, most of them seem so obvious now that I question what my younger self was thinking.

The mistakes I made are things that a lot of people do wrong. Fortunately, I've been able to fix them and drastically improved my finances as a result. If you're dealing with similar issues, I've explained my biggest money mistakes – as well as how I fixed them.

1. Not saving a portion of every paycheck

My costliest mistake, by far, was that I didn't make a habit of saving money. I wanted to save, but it was never a priority. My thinking was that I'd save whatever I had left over at the end of the month. As anyone who has tried that knows, it rarely works out well.

As I got more serious about money, I adopted one of the most recommended financial habits: I started to pay myself first by sending money to my savings account right after getting paid.

You don't need a lot of disposable income to do this. Even if you're saving $20 a month, it still adds up. Most importantly, it gets you into the habit of saving money.

2. Overspending with credit cards

I definitely got into some bad habits with my credit cards when I was younger. I wasn't using a budget, so I'd spend what I thought I could afford. I made purchases that weren't covered by the money I had in my account because I figured I'd have it by the time my bill was due. And I carried balances, so I got charged credit card interest.

On the bright side, I never went crazy or came close to maxing out a credit card. Still, my overspending cost me money.

A few simple changes helped me get a better handle on my credit cards. I made a budget. I started tracking spending instead of guessing. And I pledged to always pay my credit card bill in full, no matter what.

3. Waiting to invest and save for retirement

When people told me it was important to start saving for retirement at a young age, I never paid much attention. I figured retirement was decades away, and I'd find a solution along the way.

But the advantage of starting early on your retirement savings can't be overstated. Thanks to compound interest, a head start of a couple of years can help you save tens of thousands of dollars more.

This was another habit I had to develop. Along with contributing to my savings every month, I also set up regular retirement contributions.

4. Not having an emergency fund

Maybe I'm weird for thinking this way, but an emergency fund always seemed kind of depressing. You're saving money, but not for anything enjoyable. You're saving for the possibility of something going wrong.

As I found out, it's much more depressing not to have an emergency fund when you need one. This was also a reason I overspent on credit cards – I didn't have a safety net for emergency expenses.

Once I'd had enough of that, I set up savings for emergencies only. I contributed to it regularly until I had six months' worth of living expenses put away. And I've realized it isn't depressing at all. Quite the contrary, my emergency fund takes away financial stress.

5. Failing to plan for big expenses

My philosophy for big expenses used to be that I'd resolve them as they happened. There was no planning ahead for things like tires for my car, holiday trips, or moving to a new apartment.

This led to a lot of unnecessary stress. Even during times when I was supposed to be relaxing, like vacations, I was worrying about money.

The best way I found to fix this is by setting savings goals for all future big expenses. I save a specific amount per month toward each goal. Opening a separate savings account for each of these goals has also helped.

6. Using a subpar credit card for too long

I've had credit card debt in the past, but I've always handled my credit score well. I pay on time and don't use too much credit, which helped me get good credit at a young age.

The problem was that I waited far too long to make the most of my good credit. Instead of shopping for the best credit cards and picking one with high rewards, I just applied for a card with my bank. I spent years earning a mediocre 1% back on every purchase when there were cards offering much more.

This has probably been my biggest change. Nowadays, I'm a credit card enthusiast. Before I apply, I always compare credit cards to make sure I'm making the right choice.

7. Wasting time on unrealistic financial goals

Despite some poor financial habits, I was very keen on making more money in my twenties. But I looked for quick fixes instead of real solutions.

I searched for ways to double and triple my money. Basically, I wanted a get-rich-quick scheme. Luckily I didn't lose any money on silly ideas like these, but I wasted time.

Eventually, I realized that I may not achieve overnight results by investing, but I could at least start growing my wealth. I started putting money in a mutual fund through a brokerage account, and that has been my best investment to date.

There's no denying I used to be bad with money. After a lot of learning and hard work, I'm in a much better place. If you're not completely satisfied with your financial situation, fixing your money mistakes could get you the results you want.

This article was written by Lyle Daly from The Motley Fool and was legally licensed through the Industry Dive publisher network. Please direct all licensing questions to