Your 20s are a mix of freedom, first jobs and figuring life out. But if you get your finances right early, you’ll be decades ahead. Most people don’t. Instead of saving, they overspend. Instead of investing, they delay. But you don’t have to repeat those financial mistakes. Here are seven of the biggest financial traps to avoid in your 20s — and what to do instead.
1. Living Above Your Means
That first paycheck feels amazing. Suddenly, you want the newest phone, a car lease, weekend getaways. The result? No money left at the end of the month and when there was a financial emergency, you will have to borrow some money. We have seen it happen a lot of times around us.
Why it matters: This habit locks you into a cycle where you rely on debt instead of building wealth. You might look successful but feel broke.
Fix it: Live below your means. Track your spending with our Personal Financial Worksheet of use tools like YNAB or Mint. Save at least 20% of what you earn. You probably think, 20% isn’t an option “I don’t earn that much money”. But track all your expenses and differentiate between wants and needs.
2. Ignoring Investing
Most people think investing is for later, It’s not. This one of the biggest and most heard financial mistakes older people will tell you. The earlier you start, the more time your money has to grow.
Why it matters: Compound interest is your biggest financial ally. Waiting even a few years can mean losing thousands in potential growth.
Fix it: Start small — even €50/month. Use index funds, ETFs. We started personally with €25 into Vanguard FTSE All-World UCITS ETF and now it’s grown more than we expected because of the compound interest. The habit matters more than the amount. For help choosing where to start, check out Bogleheads.
3. Relying on One Income Stream
Your salary isn’t necessarily guaranteed. Layoffs, recessions and market shifts happen always during a career.
Why it matters: One income = one point of failure. Losing it can wipe out your stability.
Fix it: Start a side hustle. Freelance, rent out assets, sell digital products. Multiple income streams = more freedom and more security. Learn more here.
4. Neglecting Your Credit Score
Many people ignore credit until it’s too late. But your credit score impacts renting, loans and even job opportunities. This will end up in even bigger financial mistakes then you can think off.
Why it matters: A low score = higher interest rates and fewer financial options.
Fix it: Pay bills on time. Keep card balances low. Use one credit card responsibly and pay it in full monthly. Check your score regularly with tools like Credit Karma or Experian.
5. Not Saving for Emergencies
Emergencies always come when you least expect them — job loss, car repairs, medical bills.
Why it matters: Without savings, you fall back on credit cards or loans, making the problem worse.
Fix it: Aim for 3–6 months of expenses in a separate savings account. Start with one month and build. Automate your savings using apps like a good excel worksheet, or use apps like Revolut or Monzo.
6. Falling Into Lifestyle Inflation
You get a raise — and immediately upgrade your life. New apartment, better car, more nights out.
Why it matters: Earning more doesn’t help if you spend more. You stay stuck. The major problem is most of the time lifestyle inflation doesn’t even make you happier.
Fix it: Keep your expenses stable as income rises. Direct raises toward savings, investing, or debt. Grow your lifestyle slower than your income. Read our guide on how to automate your finances.
7. Ignoring Financial Education
Money is part of life — whether you understand it or not. Most schools don’t teach personal finance (or financial mistakes). That’s on you.
Why it matters: The less you know, the more likely you are to make expensive mistakes.
Fix it: Read books like Rich Dad Poor Dad or The Psychology of Money, or whatever you like in the financial category. Personally, reading I Will Teach You to Be Rich changed how I viewed budgeting. Follow podcasts and finance creators. Ask questions to people. Learn consistently. You can start with our beginner-friendly breakdown at our starting point for our side hustle journey.
Final Thoughts about Financial Mistakes
Your 20s are the perfect time to build financial habits that stick. Avoiding these common money mistakes puts you years ahead. Save early, invest often, and think long term. The freedom you create now will change your entire future without sacrificing your peak years.
