10 Money Mistakes to Avoid in Your 20s


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A decade of unfocused financial habits and money mistakes will eventually take a toll.

Your twenties can be a great time full of tumultuous moments and decisions that I hope you’ll learn from, particularly about money. I mean so much is happening with your financial situation, from dating to getting married, getting an education, your first job and discovering the things that make your heart quiver (expensive hobbies).

For many people, their twenties will be the first time they get a true taste of independence and dealing with money.

So what should you do with your money during this time? The financial decisions you make in your 20s will have an impact on your 30s and beyond. Therefore, to survive your twenties you need to live well below your means to really get yourself set up for life. 

Here are 10 very common money mistakes that if avoided, can help you sail into your next decade a little more smoothly. The biggest money mistakes I have noticed that twenty-somethings have made, including myself are: 

#1 – Failing to Plan

Failing to plan, is planning to fail. Cruising through life without a plan is like sailing into the open ocean without a compass. 

A good financial plan is absolutely necessary to give you direction and define what you want out of life. Great plans also help you maximize your income, help you invest smartly, and avoid unnecessary taxes every year. Invest some time every year working your financial pan, and also study up to brass up your money skills. 

#2 – Taking On Debt to Finance Lifestyle

Being saddled with credit card debt when you’re just starting out is going to put a strain on your finances for a long time.

If you are in your twenties, you really don’t need a fancy car and therefore, don’t need to borrow to buy a car. What you really need is a reliable fuel-saving vehicle. It is also okay not to be able to afford a car immediately. You can still use matatus, ubers, boda-bodas or even carpooling. 

And when you find the love of your life and want to tie the know, remember that weddings are just one day. So come up with a budget and look at your options carefully before getting yourself into long term debt to finance your big day. The last thing you want to do is ruin your memory of that day with regret of debt for years to come. 

In your twenties, simply avoid overpaying and overspending on anything that isn’t a necessity. Buy a car that you can afford and have a wedding that won’t leave a bitter taste in your mouth. Else, at the end of the day, you won’t be able to eat and pay insurance or pay back debt too. 

#3 – Forgoing Insurance

When you are young and seem healthy, you hardly give a second thought about your health status. I mean you rarely visit the doctor’s office, so why do you need to get some health insurance. However, the expenses of any medical emergency can quickly add up and leave your broke to the point you’ll need a pay bill number to save your life. 

As Kenyans, we are very kind and generous beings, who are always there to support each other. That doesn’t mean you should live your life as though you are invincible. You can either learn now or plunge yourself and your family into debt with medical emergency costs. 

So get yourself covered as much as you can. Take out insurance for your health, life, property. Get the best competitive rates, budget and properly insure yourself and your property. 

#4 – Failing to Save

A lot of people in their twenties are harbouring financial lies that cloud their reality about their own money habits and financial situation. It is easy to tell yourself that your ‘future self’ will take care of this and that i.e. saving and debt. So you just choose to live in the present and brash everything under the proverbial rug. 

Don’t avoid creating an emergency fund should you suddenly lose your current source of income, get sick, have a child or even have your car break down. Strange things happen when you choose to live in a glass house. 

So take time out today and give yourself an honest assessment of your own financial situation and build on that. 

#5 – Putting Off Saving For Retirement

Saving is a crucial aspect of your journey to financial security. Putting off saving now is setting you back years to financial security. 

You probably think that you are only in my twenties, why so why do you need to think about saving or retirement when you don’t even have enough income. I felt the same way and as a result, I lived from paycheck to paycheck in my first year of employment. NSSF ways the only way I for retirement because it was mandatory. I didn’t start seriously saving until much later. Postponing the decision the save for yourself will work against you later. That’s just how the math works – the earlier you start, the more time your money has to grow into a healthy fund that will adequately sustain you in old age. 

It all boils down to one simple fact: Start early and retire rich.

At the end of the day, you cannot adequately predict what the future holds for you but with proper planning, you can prepare for it.  The rule of thumb is to try and save between 10% -15% of your income for retirement, starting in your 20s. The later you start, the more you have to put away. 

#6 – Wasting Time

This is a big one. Even for me. 

Your twenties is the time to get a headstart in life because its the time you’ll have the most time and energy to run around and get things done. The habits you develop now in terms of saving, earning, spending and debts you incur, will have an impact on you well beyond your 20s. 

So instead of binge-watching Netflix, put your extra time to earning form extra money and make lucrative income with side hustles to earn extra spending cash. This way, you can put away more for the things that are important to you i.e. buying an apartment or starting a business. 

#7 – Avoiding Taking Risks

The 20s are for messing up and living it up. It is time to grab opportunities and sees where life takes you. 

Not taking calculated risks in your twenties seriously reduces your chances of living your best life later. As when the kids, married or other things come along, you won’t have that opportunity with all those responsibilities. So start. Take those smart risks early like starting a business, moving to another country, getting an education in your chosen career etc. 

#8 – Not Building A Good Credit Score

A great credit history is important when applying for a loan to buying a car on loan, mortgaging property (apartment, home and land) and more, or applying for a credit card. Building a great credit score  involves a lot of practice in keeping good creditworthy habits  such as: 

  • Making your payments on time 
  • Borrowing well below your limit
  • Maintaining a healthy balance on your credit card (30% of your credit limit)

With all these loan apps, things can get really bad for you real quick in your twenties. So take the time to build a great credit score and also check it as often as possible. Banks tend to use credit scores as a measure of your overall financial health. So, take care of it. Avoid getting blacklisted by the credit bureau as this can seriously hamper any plans you may have for personal financial growth. I cannot stress this enough. 

#9 – Allowing Expenses & Debt to Balloon

This is a common money mistake – allowing expenses and debt to balloon with time. 

Any debt you take on must be repaid and any increase in unwarranted expenses is stealing from your future. These things will extend the time you’ll take to achieve financial security. Remember the less you borrow the less you’ll have to pay later and the less you spend, the more you can put towards achieving financial security. 

As much as you can, try to maintain low expenses in your twenties and save as much as possible. This also means, try not to borrow as much. If you do, make sure you pay off the debts that are charging you the highest interest. This kind of debt is what we consider bad debt and it does not help your financial situation at all. 

Overall, maintain low expenses and debt in your twenties. 

#10 – Doing Life Without A Financial Plan

How much does it cost you to live the lifestyle you are currently accustomed to?

And, how much will it cost you to live the lifestyle you are working so hard to achieve in let’s say 10 years? 

If you have no idea, then what are you really working towards? 

Building wealth and financial security don’t just happen miraculously. These things take time and effort to create. Like everything we do in life, you need to plan for this too. A financial plan puts everything into perspective and sets parameters of your budget and targets on which to focus on. 

So if you want to buy a house, pay off debt, build a business, save for a car and also put away some money for retirement, you’ll need to sit yourself down and come up with a plan. 

Image credits: Top via Gratisography by Pexels

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Irene Makanga
Irene has an MBA in Finance and is an avid businesswoman, passionate about financial literacy.


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