What Not To Do With Your Finances in Your 20s
Your 20s are often described as a time for self-discovery, new adventures, and figuring out life—but let’s be honest, it’s also a decade ripe for financial missteps. Looking back, I see now how many of my money mistakes could have been avoided with more knowledge, confidence, and planning.
From overspending on unneeded items to neglecting long-term savings, I’ve learned the hard way what not to do with my finances. In this post, I’m sharing 10 financial mistakes I made in my 20s, the lessons I’ve learned, and how I would approach things differently today so you can avoid the same oversights and build a stronger secure financial future.
1. Not saving a portion of my pay check or bonuses
One of the biggest mistakes I made in my 20s was not saving a portion of my pay check. At the time, it felt like there was always something more pressing to spend on—nights out with friends, shopping sprees, or last-minute trips.
Saving felt like something I could “start later.” But looking back, I realize how much those small savings would have added up over time, especially with the power of compound interest. If I could do it over, I’d commit to saving at least 20% of every pay check, no matter how small, and automate the process so I wouldn’t even miss the money. This simple habit could have set me up for a much stronger financial foundation.
As well as this, if you don’t know where to invest or are worried about not being able to access your money, this may result being left in a bank account with low interest rates and where it is even more tempting to spend. An account such as a Cash ISA is a great option to start as it is low risk and easy set up but uses your money more effectively within a higher interest tax free account.
2. Waiting to invest in equities
The world of equities such as stocks or index funds can be overwhelming and intimidating, I convinced myself I needed to be “rich” or have extensive knowledge to get started. The idea of putting money into the “risky” stock market can be extremely off-putting as short term your investments may fluctuate and lead you to feel you have made a mistake.
It is important in these times to be patient for long-term benefits which often are not easily seen. I missed the opportunity to build wealth through diversified, long-term investments like index funds or ETFs. If I could go back, I’d start small, educate myself, and consistently invest a portion of my income in the stock market. It’s not about timing the market; it’s about time in the market, and I missed out on that. The effects of compound interest can allow your investments to snowball into a much bigger portfolio than expected.
3. Not thinking about saving goals
Not thinking about saving goals in my 20s was a mistake that left me directionless with my finances. I would save randomly when I could, but without a clear purpose, that money often ended up getting spent on things I didn’t truly value. I didn’t have specific targets, so I lacked the motivation to stay consistent. Looking back, I see how defining savings goals could have helped me focus my efforts and make more intentional financial choices.
Saving with a specific goal motivates you to be disciplined and stick to saving habits that become a common routine in the future. If you don’t know how much to save to achieve your goal mapping out where you can reduce expenses over a timeline can be a helpful start. Furthermore, talking with our financial coaches, Women’s Wealth can assist you to clarify your goals, create a realistic savings plan and ensuring that your money is working effectively toward the future and goal you envision.
4. Overspending with credit cards and credit score
Overspending with credit cards is a mistake that can take years to recover from. Credit cards can be a trap easily fell in to with the thinking I will just “pay it off later”. However, this dangerous approach can cause debt to spiral out of control with high interest rates and hidden fees.
A good credit score is necessary for financial opportunities as a high score qualifies you for lower interest rates on mortgages, car loans, and personal loans. Looking back, I wish I had understood the importance of using credit cards responsibly and only for purchases I could pay off in full each month. A credit card is a tool but needs to be used wisely and responsibly in doing so will help remove financial stress.
5. Not setting up a pension or adding to it
While you are in your 20s the last place you want to be putting your newly hard-earned money is in an account you won’t be able to access till your retired. It often feels like a distant concern that eventually you will sort out. However, the sooner you start this process the greater you help yourself later due to compound interest. If I could go back, I’d set up a pension as soon as I started earning, even if it was just small regular contributions.
Whether through an employer plan or a private scheme, building a pension early is one of the smartest ways to secure your future self’s financial freedom. It’s also worth checking your pension plan and how it is invested as even a simple change creates a dramatic effect in the long term. A financial advisor could also have guided me in choosing the best pension options and maximising my contributions.
6. Focusing on your income
Not focusing on income in my 20s was a mistake that limited my financial opportunities. While budgeting and saving are important there’s a limit to how much you can save without increasing your income. By prioritising skill building and pursing career advancements you can boost your earning power over time.
Had I been more proactive about negotiating salaries, exploring promotions, or even taking on side gigs, I could have significantly boosted my income. A higher income gives you greater financial flexibility and creates more opportunities for a secure future.
7. Not having an emergency fund
Not having an emergency fund in my 20s was a mistake that caused unnecessary stress when life threw unexpected challenges my way. An emergency fund can protect you in 2 different types of financial emergencies: spending shocks and income shocks. Spending shocks are seen as unwanted expenses this can be anything from car repairs, home repairs or medical bills. Whereas income shocks are unplanned losses of income such as being let go from your job or a change in career.
Emergency funds are crucial in reducing stress and allowing you to have more control in these sudden unforeseen financial circumstances. If I could go back, I would start saving early into my emergency fund to cover 3 to 6 months of living expenses to have that financial cushion.
8. Not making a budget and tracking spending
Without a clear plan for where my money was going, I often found myself spending on impulse and not realising how much money I was wasting. A budget can be a lot of effort and extra work to add on to your busy schedule but working out your expenses is the best way to learn where you can cut down unnecessary costs and therefore meaning you can put more into those crucial savings.
If I could go back, I’d create a budget as soon as I started earning, tracking both my expenses and savings, and adjusting as needed. Budgeting doesn’t just help you save—it gives you control over your financial future and helps you make smarter, more intentional choices.
9. Inflating expensive lifestyle
As you develop your career and move up the ladder it can be tempting to upgrade your lifestyle to match your pay check. Living pay check to pay check means you are unable to contribute to your savings and you are unable to protect yourself in emergencies. If you get used to a certain standard of living it can be hard to reduce your outgoings if your income drops.
The pressure to match my lifestyle to my income prevented me from building a solid financial foundation. If I could do it over, I’d focus on living below my means, regardless of how much I was earning, and channel that extra money into building wealth and financial security. Scaling back on lifestyle inflation allowed me to focus on my long-term financial goals rather than temporary, material upgrades.
10. Not learning about personal finance
Not taking the time to learn about personal finance was a mistake I regret. I thought I could simply figure things out as I went along, assuming that basic knowledge about budgeting, investing, and saving would come naturally. But the truth is, without understanding key concepts like compound interest, credit scores, or tax strategies, I was making decisions based on limited information which often led to costly errors.
If I could go back, I’d invest time in educating myself about personal finance, whether through books, podcasts, or even seeking advice from a financial professional. The more you learn, the more confident and capable you become in making smarter decisions with your money. A strong financial education not only helps you avoid mistakes but also gives you the tools to build long-term wealth.
Looking back on these mistakes, I’ve learned that financial growth isn’t about perfection—it’s about making smarter choices and learning from your experiences. The key takeaway here is that it’s never too early to start making better financial decisions. Habits you form today will shape your financial future and build you a solid foundation.
If you are ready to take control of your finances and need guidance, you can visit Women’s Wealth to find a trusted financial advisor who can help you create a personalised plan for your future.