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Getting your first full time job after leaving college or university is one of the most exciting moments in a persons life.

After years of working hard to get good grades in school, finally being offered a full time position and full time income is the most incredible feeling. It’s the time you have waited so long for where you can now begin saving to build for your future and treating yourself from time to time to the things that make you happy.

However, many of us can quickly fall into bad financial habits when we first start earning money, and the decisions that we make in our early 20’s can go on to affect our lives dramatically for years to come.

So if you are just beginning your career, please read on to learn the most common financial mistakes that people make in their early 20s, ways to avoid making these mistakes and ways to fix the situation if you are among the many of us that have already fallen into any of these bad habits.

5 Financial Mistakes People Make in Their 20’s


The excitement of finally being in a position where you are earning a regular income can cause many people to overspend in the early days. Spending excessive amounts of money on things that they simply do not need such as eating out, takeaways, coffee and lunches, holidays, clothes, entertainment, subscription services and unnecessary electronics are the most common things that millennial’s waste their hard earned cash on.

It’s so easy to fall into the cycle of thinking its okay to ‘treat yourself,’ but then by the end of the month you have splurged so much that you end up skint.

Most of us overspend without even realising it. So if you think you are one of the many people who overspend every month, I challenge you this month to write down every single item that you purchase and identify the areas in which you are overspending.

If you already know that you are overspending each month then this is going to be painful. However, the minute that you write down your outgoings, and recognise that you’re spending perhaps 20% of your monthly earnings on eating out and food, you will start to reconsider that daily Starbucks.


Damaging your credit rating in your early 20’s is very easy to do and can have a detrimental effect on your ability to apply for credit and mortgages later in life. While you can quickly and massively damage your credit rating with just a few poor decisions, building your score back up can take months or even years!

The key factors that can influence your credit score are as follows:

  • multiple applications for credit
  • an unstable address history
  • missing payments and not repaying debt
  • how much of your available credit is in use
  • CCJs, IVAs and bankruptcy

I will be shortly writing an in depth blog post on how to avoid these mistakes and how to improve your credit score but if you are looking for advice or information in the meantime then I highly recommend this article.


Many of us will use credit cards in our early 20’s to help out with unexpected bills or even with the intention of using it as a way to build up a positive credit history.

While using a credit card sensibly is an excellent way to improve your credit score when you are young, it is very easy to fall into the trap of using credit cards to spend money on things you can’t afford with the intention of paying it off at the end of the month.

However, as many people end up learning the hard way, this can lead to overspending and not being able to pay back the money every month. This in turn actually leads to potentially damaging your credit score further and getting stuck with unmanageable interest charges every single month.

The best way to avoid this happening to you? Only take out a credit card if you are absolutely certain that you will be able to pay it off in full every month. Consider setting up a direct debit to clear the balance at the beginning of every month and choose a manageable credit limit.

Credit card companies want us to fall into debt: charging interest is how they make their money. For this reason, they will often grant us credit limits in the thousands with the expectation that we will rack up a large balance. You can always call up your credit card provider and ask them to lower your limit so that you are not in danger of falling into debt that you can’t pay back.


If you don’t set out a monthly budget for your money, then how can you possibly expect to manage your money successfully?

Despite this seeming like a no-brainier, there are more people out there who do not use some type of monthly budget than those who do. If you are serious about managing your money responsibly then you absolutely must find a way to track your monthly incomings and outgoings.

I personally just use an excel spreadsheet but there are many ways that you can do this; writing down on paper, multiple apps available and even physical diary like planners which you can purchase from any stationary store.

Find a solution that works best for you and use this to track all your monthly income including your salary, any side hustle income, money from selling online etc. Then make a list of any regular expenses such as rent, mortgage, phone bill, internet bill, utilities and so on. You can now decide how much money you wish to dedicate to what I call ‘variable expenses’. This includes groceries, petrol or gas money and ‘fun money’ for things such as entertainment, clothing etc.

You can now see how much money you will have left after all the essentials are taken care of and you can decide how much you are going to put into savings and assess areas that you might wish to cut back on.

I know the idea of starting a budget can feel very daunting, especially if you have never done this before. If you’re not sure where to start the please download my free budget sheet. All you need to do is fill out the fields with your income and complete the expenses fields and the sheet will do all the other calculations for you!


if you are not setting any personal financial goals then how are you going to hold yourself accountable for the money that you are spending, and how are you going to save for the meaningful things that you want to create in your life?

Everybody needs to set goals in order to keep moving in the right direction – and its no different when it comes to your hard earned money. Even if you’re not good a ‘goal setting’, then find a way that suits you. Start small, write down what you want to accomplish over the next 12 months on a piece of paper and stick it to your fridge. Or create a vision board with images and text of the things that you want to have in your life. If you see this every day then it will help you to focus and stay on track.

Whether you are saving for the deposit on your first home, for your dream holiday, or you are just looking to save up an emergency fund; setting specific goals in your early twenties will put you on the path to making sure that you make the most of your money. Plus, setting great habits in the early days will make it easier for you to carry these behaviours with you for a lifetime.

To Finish Off…

I hope you enjoyed this post and you can take it as a warning to stop yourself falling into the same traps, or if you’ve already made some of these mistakes then you’ll be able to take on these tips to get yourself out.

Take care and I will seen you around soon for more personal finance tips!

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