What are 10 bad financial decisions to avoid in your 20s?

I stumbled upon this question on Quora and thought I might give it a go. I think the 20s is the best decade to build some good habits that will set you up for financial success later in life. That’s not a hard thing to do, as long as you avoid some bad financial decisions.

That’s because our “early life” will usually set the pillars for our “later life” which is when kids and other obligations arrive.

Avoid bad financial mistakes - work smarter

Certainly, some people do have kids in their 20s, but the majority of people have kids in their 30s. Later in life (30s, 40s) costs go up with kids activities, mortgages, and other obligations. It’s much better to come prepared with a small amassed pot rather than getting stressed about money later.

Don’t get me wrong. It’s never too late to start thinking of financial independence. I keep getting emails from people in their 40s and 50s who do have early retirement in mind. There’s no problem with that.

But it’s much easier if you start ahead. So if you’re reading this and you’re in your 20s or in college, you’re in a very lucky position having the entire life ahead of you.

With that in mind, let’s see what are the top 10 financial advice to follow in our 20s.

1. Live like you’re in college for the first few years

This will teach you how to save and how to avoid lifestyle inflation. As a result, you will learn how to be disciplined and control your own life.

No, usually our life choices don’t belong to us. They are controlled by the advertising and the marketing industry showing us what to buy at each stage of our life.

Once you learn how to fight social pressure, you’re ahead already. Living within your means is one of the pillars of financial independence.

Learn how to resist spending your first year’s salary on a fancy car on finance and you have won your first battle. The battle of not copying what everyone else is doing. Having some money left over each month is the first great step to financial freedom.

2. Don’t take the first job just because it pays more

At the beginning of your career, the goal is to learn learn learn! Therefore, you should be focusing on jobs that teach you a lot rather than ones which offer comfort and sharp 9-to-5 rules.

If possible, go work for a small company or build your own. The goal is to get to do everything – from taking customer phone calls to sales to technical support.

One of my first jobs was at a startup, and although hectic I learned A TON of stuff which I then used to reach the £100k salary target in my 30s.


3. Avoid debt like the enemy

I have written about Good Debt vs Bad Debt before.

Good debt is when you take a loan to buy a house which appreciates in value over time. Bad debt is when you take a loan to buy a depreciating asset, something like a car or a yacht.

Over time, depreciating assets lose their value and you get back less than you bought them for.

Usually, in our 20s, we take on debt to buy depreciating assets because they are cooler. But who are we fooling?

Taking debt is simply borrowing from your future self.

Even worse, we need to pay back more than we borrowed thanks to interest. By the way, by loan I don’t necessarily mean bank loan. It’s the same when we put stuff on the credit card without paying in full each month. Stay away from that!

4. Go work for someone you admire for free

For free? “LoL,” I hear you say. But trust me, that will teach you much more than a £25,000 salary will. Soon enough, your experience will be invaluable.

That’s what Gary Vee advocates and I fully support that. I don’t mean go work for anyone without getting paid. But if there’s one person you admire, it’s worth approaching them with that proposition.

Some internships are like that and they soon offer a full-time salary.

5. Learn to invest and what compound interest is

Usually, people start investing by default because their employer contributes to their pensions. Some don’t even know this is happening or where the money is going.

But if you start investing from such an early stage out of your pension then you have a huge advantage compared to your peers.

No, the money that you put in is probably only a small fraction of what you’ll be able to invest later in life. But you’re building this small snowball that will hit you big later, called “Compound Interest”.


Basically, the money that your money generates will start working for you next year and the year after, and so on and so forth.

6. Avoid expensive cars

A car’s utility is to take you from place A to B safely. Buying an expensive car early in life is one of the biggest and most common mistakes.

Trust me, you will impress your friends a lot more when you build your million dollar business with this cash instead.

7. Embrace a cycling lifestyle

Using a car or transportation for short distances is not the best way to move around.

If you start cycling instead then you’ll soon experience the benefits of cycling such as better body, healthier lifestyle, mental balance, low stress and big money pockets thanks to the huge savings.

Seriously, I’ve been cycling on and off in my 20s and realised that whenever I cycle to work I’m happier and more awake compared to my previous self.

Our mood and our brain are very much dependent on what’s going on in our body. Exercise releases endorphins and our body loves that. As a result,  our mood becomes very cheerful.

8. Take financial advice VERY carefully

Ironically, you don’t have to listen to me! Trust nobody with your money, only your education and market history. Read books such as Smarter Investing and The Four Pillars of Investing and others in the Financial Independence Resources list.

Take financial advice only from people that are qualified, eligible and charge very low costs (either a fixed-fee or a very small percentage fee. Less than 0.3%.). If you think financial experts have your best interests at heart, then Where are the customer yachts?

Usually, people who recommend a particular financial product are there to make a profit from you.

Stay away from expensive, “invite-only” deals and focus on building your wealth, simply and passively. How do you spot the difference? See step 9.

9. Read money books, learn about FIRE

FIRE (financial independence retire early) will teach you how to live within your means, how to invest your money for a profit and how to be happier in life by optimising every aspect of it. Little by little, one step at a time.

It’s a community that keeps growing and as a result, more people benefit from this movement.

And if you’re in London, UK, then why don’t you join the Financial Independence London Facebook group and come to our free social meetups.

Oh and yes, books. Personal finance books are awesome. They are the shield against all this nonsense BS financial advice you get every day from the media and from experts.

Read The Simple Path to Wealth book and Mr Money Mustache blog. They will teach you the FIRE principles.

You can then laugh at others when you escape the rat race and retire in your 40s.

10. Stay the course

Life will throw all sort of things at you.

Financial crashes, you will lose your job and sometimes things will go left. But if you avoid all those bad financial mistakes early on, you’ve created a massive shield against all these. You’ve built your own luck.

You now just need to stay the course 😉

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4 thoughts on “What are 10 bad financial decisions to avoid in your 20s?”

  1. I particularly like number 1 – “Live like you’re in college for the first few years”.

    Actually, I’d argue that people should be living like they’re in college until they have over 100k invested. Just having a shiny contract that says you are going to be getting a certain amount each month doesn’t mean you should go and spend it (or finance it!) Being rich has nothing to do with your salary <- I did a post on this!

    Whilst living like a student is a good thing to do to acclimatise to your new found salary, I encourage doing so for as long as possible even after you're making a killing in your career. Anything above minimum wage is actually classed as lifestyle inflation. Hopefully you'll be able to stick in there for as long as possible and then when you need to increase your spending due to kids or winding down, you should have a decent chunk invested to get you through it – or you could quit all together! Plus living like a student is fun…Spending less makes you happier <- another shameless plug! 😉

    Great post! I've always enjoyed your content. In fact, I think I first heard about matched betting through your blog about a year and a half ago!? Loving the new site theme as well!

    • Saving ninja, every blogger wants to have such readers – posting a comment before the newsletter goes out 😉

      Thanks, for your insightful comment. Indeed being rich has nothing to do with your salary. I hate seeing people who enjoy high salaries live like rich but getting stressed living paycheck-to-paycheck.

      However, there needs to be a balance. I don’t necessarily agree that anything above minimum wage is lifestyle inflation. If you’re at a 90% savings rate but not enjoying life or being deprived just to meet your ££ targets – that’s not a life worth living is it. Upcoming post on this one very soon…

  2. Hi Michael

    Another thought worthy post, thumbs up.

    I’ve always considered myself good with money, but if I could go back in time I’d definitely tell my younger self to take notice of #2.

    Unfortunately thinking how any decision now is going to affect you in 10, 20, 30 years or more is something that I think that we all can neglect for the sake of what we might consider a quick fix.

    • Hi David, thanks for commenting. I’m sure it’s not easy to think in 10-year terms especially when one is young! If I had a chance to go back in time I’d definitely read more books and invest sooner.


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Hi! I’m Michael and I love writing about different ways to earn, save and invest our money. Coffee addict :)

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