We often look back on past and present financial mistakes with shame, embarrassment, and annoyance. We can judge ourselves harshly for stupid financial decisions we have made, whether that be taking on debt, throwing away money on things we can’t even remember or any other financial mistake you can come up with.
Just like skipping a day at the gym, there is no positive benefit to beating yourself up for making a financial misstep. The best thing we can do for ourselves is to get back it the horse, to reflect on the behaviour, habit or lack of knowledge that led to that financial mistake, and try and make more intentional and informed financial decisions going forward, armed with our past experiences to guide us.
Now, well into my 30s, I often consider the things I wish I knew as a young adult and ponder how much it could have changed things.
Would I be further ahead financially had I done things differently?
Could I have reached FIRE (Fire Independence Retire Early) by now, or much sooner?
Would I have started my own business years ago? Could I have helped people sooner?
Could I have travelled more or started to live a more meaningful life earlier?
Don’t get me wrong, I am extremely grateful to be where I am, but I feel reflecting on my past financial mistakes is always a good way to remind me of my financial principles and where I started. And hopefully will be an opportunity for me to pass on valuable lessons in my life to help you avoid making the same financial mistakes I did.
Here I am reflecting on 5 Financial Mistakes I Made in My 20s That Changed My Financial Future
5 Financial Mistakes I Made in My 20s That Changed My Financial Future
1. Only Saving What Was Left After Spending
When I got my first full-time job at 21, I very quickly became accustomed to my paycheck. I went from working part-time to full-time and completely changed my lifestyle to align with my new larger and more consistent income.
During the first six months of working full-time, I adopted a spend first, save last financial philosophy.
I was bringing home just over $3000 a month as an Assistant Accountant. I was still living at home at the time, just paying $100 a week in board plus my own bills. Somehow I still could only save a measly $100-200 a month. Just over 5% of my income when I had barely a financial care in the world as I was living at home still.
Each month I would do my savings transfer of what was left in my account. I soon realised, that each month I felt a huge sense of guilt when I logged into my account to see that I had only a small amount left over to save of my paycheck. I know that having some savings still sounds like an accomplishment, but I was a born saver. This wasn’t really an accomplishment to me. It was a failure in my eyes.
Thankfully within 6 months of getting my first full-time job, I realised that something needed to change. I didn’t want to keep spending my money without knowing where it was going and leaving saving to an afterthought.
I set up automated savings transfers to transfer my savings on my payday so that I could still spend my money, but there would at least be a boundary set to give me a spending limit. It also took the work out of it for me as the transfer happened automatically so saving became easier overtime, and soon enough I adapted to my slightly lower spending allowance. I was actually surprised how easy it was to adapt after I got used to it over a few weeks.
By adjusting how I did my savings to ‘pay myself first‘, I was able to pay off a $5,000 car loan, $11,000 in HELP Debt as well as save up a deposit for my first home within three years of starting at my first full-time job!
And this one long-term change I implemented into my finances, sparked by this one financial mistake I chose to learn from has set me up financially for life. Since then, armed with my financial principle to ‘pay myself first’, my husband and I funded a Wedding, our Honeymoon in Europe, paid off over $40,000 in Student Debt, paid off a huge chunk of our mortgage and funded travel all over the world!
It’s just one example of how one small change to your finances, made as early as you can, can compound over the years and change your financial future!
2. Not Planning Ahead
When I was 20, I had about a thousand dollars in savings and felt like that was a pretty good position to be in. This view all came crashing down when I opened the mail one day and found two bills addressed to me.
I ended up with two bills totalling $1300 for my car registration and Greenslip Insurance (medical vehicle insurance) that I had completely forgotten was coming up.
I remember thinking at that moment how much I had royally fucked up. I was annoyed at myself for being so forgetful that the bill was coming.
I wasn’t able to borrow money from my parents so I had to completely deplete my savings to keep my car on the road and get to work and find a few hundred dollars to fill the gap in order to pay those two bills. Thankfully I was able to take on some extra shifts and managed to put enough together by the due day to pay the bills.
But that left me short for paying for my rego check or any repairs to my 1994 Camry so it would pass rego.
I ended up having to borrow $50 from my mom to tide me over until I got paid again so I could pay for a rego check and new wiper blades. If I had needed more expensive repairs I would have been in trouble. I hadn’t borrowed money from my mum in a long time and had always felt proud by that, but now felt like a bit of a failure having to do this. I just knew that I didn’t want to have to borrow money from anyone else ever again I wanted to make sure I would be prepare next time and could stand on my own two feet financially!
So I made a mental note to myself to always save up for repairs and car expenses in advance.
This experience taught me a very valuable Financial lesson in planning ahead for bills. Something that was such a pain in the butt at the time stuck with me all these years and taught me some very important financial principles.
In the 14 years since I have never once forgotten to save up for an annual bill. 💪
Over the years, this lesson has saved me so much anxiety and stress around money. I always know that if something comes into my inbox (we’re back to 2021 now hehe), I’ve prepared ahead for it financially and I’m not going to have to live off two-minute noodles for the next couple of weeks or put something on my credit card until I can find enough money to pay for it. It’s already taken care of 🙂
3. Buying a House With No Emergency Fund
At 24, along with my boyfriend at the time (now husband), we bought our first home. We had worked hard over two years to save just enough for a 10% deposit on a small home and had a bit extra to buy some furniture and to cover the solicitor’s fees.
But anything else that was thrown at us financially, we weren’t really going to be prepared for. And we were so lucky!
A decade later – with my 30-year-old hat on, I now would highly encourage anyone before buying a house to make sure that you have a 3 to 6 month Emergency Fund built up for your peace of mind (especially while we’re in a pandemic!). Owning a house is expensive and it is going to try and break you financially at some point just to see if you can hack homeownership.
I remember one year, we had a hail storm and our roof was leaking as a result. We had to pay a $500 excess to claim repairs through our insurance. No big deal…
But then after making the call, I walked outside to check on our cars and realised that my windshield had been cracked by the hail as well as having other hail damage. My husband’s car also had hail damage. Great! It ended up costing us $2,100 in insurance excesses that day just to repair the hail.
Not three weeks after this happened our water heater died which set us back another $1,300!!!
It was just one of those moments where it really opened my eyes to how expensive homeownership is, and how important it is to make sure you have savings for when the shit hits the fan. Because at some point, it will, and sometimes it’ll hit that fan three times in a row.
So if you’re a homeowner, just hold on to your hat, strap in for the ride and build up your Emergency Fund to 3 to 6 months expenses quick smart so when the weather or whatever goes wrong, you are ready to go with some savings!
4. Not Investing Sooner
One of my most costly financial mistakes in my 20s was that I didn’t invest! I first started investing outside of my superannuation when I was in my early 30s! Which isn’t the worst thing, I still have plenty of time to make up for lost time, but when it comes to Compound Interest, the sooner you start, the fast your money can grow!
Initially I figured that my Superannuation was taking care of my retirement plans.
No one I knew at that time was investing so I didn’t really have anyone to talk to about it or ask advice. Plus I had $42k of Consumer Debt to repay, and wanted to save up a 3-6 month Emergency Fund before I tackled any other financial goals!
Then I came across a blogger, Mr Money Moustache and discovered the FIRE movement. I realised that I didn’t know if I really wanted to wait until 60 to access my retirement savings. That was 30 + years away. Was I really going to stay in my job until my 60s?… It didn’t sound like the greatest plan for me, personally.
And so, I started to educate myself about investing. I watched hundreds of Investment videos on Youtube and read as many Finance and Investing books as I could get my hands on.
If there is one thing I could do, I would go back to my early 20-year-old self and tell myself to invest my money and take advantage of compound interest even earlier! If you want to get started investing money, I recommend you find a flat fee, licensed financial adviser who can help you get started with your investment goals.
5. Spending Money Without Intention
Like many of us, in my 20s shopping was a hobby for me. It was a way to spend my weekend, to catch up with friends, a way to pass time if I was bored, a way to reward myself for all my hard work and probably filled some void in my life I wasn’t quite aware of at the time. I remember whenever I finished my University exams, the first thing I wanted to do was to go straight to the shops and finally have the time to go shopping. That seems a little sad to me now, but that’s what I was feeling at that moment.
This led to a lot of impulsive and unintentional spending in my twenties, to the point whereby my mid to late 20s, my home was extremely cluttered and causing me stress and anxiety.
It took a while for me to put two and two together; that my Shopping habits, in fact, weren’t bringing me happiness and that I needed to be more intentional with my money, my time, and my home. My home was supposed to be my sanctuary, not an area to store clutter.
When I first caught onto how my spending was becoming an issue, I has about 60 pairs of shoes, 50 dresses and had managed to fill up a 4 bedroom house with seemingly endless amounts of clutter. That now seems pretty crazy to me!
After decluttering about 70% of mine, and my husband’s possessions, my eyes were opened to the lack of intentionality I’d had previously when it came to spending. And to be fully transparent, it was mostly on my part.
I set about making some gradual lifestyle changes including adopting a more minimalist lifestyle which benefited my physical, mental health, and financial health.
I stopped shopping as a hobby.
I stopped browsing or shopping without a list.
I started this blog and made sure to spend my time doing things that added more value to my life.
I tried different spending bans to get on top of wasteful spending and implemented wait times before I could buy things to make sure I was buying them for the right reasons and not out of boredom, on impulse, or just because something was on sale.
It’s now been a good 7 years since I’ve made these changes to my shopping habits and the amount of money that I have been able to save as a result is truly amazing! It has allowed me to pay off over 1/4 of a million in debt and helped me to create a more meaningful life. You can read more about how this change positively impacted my financial future here.
These are 5 Financial Mistakes I Made in my 20s That Changed My Financial Future. They taught me some valuable lessons and helped me to adopt new financial principles that allowed me to live a more meaningful life.
Remember – there’s nothing wrong with making financial mistakes, we’ve all made them!
We just need to make sure that we turn those mistakes on their head and reflect on them so that we can learn from our past mistakes when it comes to money and allow those financial mistakes to help us change our financial future for the better.
Question: I would love to know, what financial mistakes did you make in your 20s and how did it serve you to change your financial future?
General Advice Disclaimer: The information on this site is of a general nature. It does not take your specific needs or circumstances into consideration, so you should look at your own financial position, objectives and requirements and seek financial advice before making any financial decisions.
