Financial Mistakes I Made in My Early 20s (So You Don’t)

In my early 20s, I underestimated the importance of financial literacy. I assumed that managing money was simply about making it and spending it wisely, but I quickly learned that understanding concepts like interest rates, taxes, and investment options can significantly impact my financial future. I missed out on opportunities to grow my wealth because I wasn't informed.

Lesson learned: Investing time in educating yourself about personal finance can pay dividends in the long run. Whether it’s through books, online courses, or podcasts, gaining knowledge equips you to make informed financial decisions. The earlier you start, the better positioned you'll be to navigate the complexities of money management.

In this post, I’ll share the biggest financial mistakes I made in my early 20s, the lessons I learned, and practical steps you can take to avoid them. If you’re in your 20s—or even 30s—it’s not too late to make smarter money moves.

1. Living Without a Budget

One of my biggest mistakes was not creating a budget. I thought I could “just keep track in my head.” Wrong. Without a plan, I overspent on small things, such as eating out, subscriptions, and random online purchases. Those small leaks drained my income before I realized where the money was going.

Lesson learned: A budget isn’t merely a restriction; it’s a pathway to freedom. It empowers you to take control of your finances, guiding your money to its intended destinations rather than leaving you to wonder where it all disappeared. By setting clear spending limits and financial goals, a budget transforms your financial landscape, allowing you to prioritize what matters most to you.

In my journey toward greater financial awareness, I’ve discovered the effectiveness of simple tools like Google Sheets and various budgeting apps. These resources make it easy to track my expenses in real time, visualize my spending patterns, and adjust my habits accordingly. This newfound clarity not only helps me stay accountable but also brings a sense of peace and confidence to my financial decisions.

If you want to start side hustles while managing your money, read my guide on how I turned my side hustle into a full-time career.

2. Using Debt for Lifestyle, Not Growth

In my early 20s, I harboured a naive belief that credit cards and loans were akin to “free money” waiting to be spent. I eagerly signed up for lines of credit, taking out loans to indulge in the latest gadgets, trendy clothes, and even extravagant outings to impress my friends. Little did I know, each swipe of my card and each loan I secured was not just a momentary thrill, but a step deeper into a financial abyss, where high interest rates loomed like dark clouds overhead.

Lesson learned: Debt should be wielded judiciously, reserved for purposes that foster growth—such as investing in education, launching a business, or acquiring assets that appreciate over time. Spending borrowed money on lifestyle choices is akin to robbing your future self, and those borrowed funds come with a burdensome price tag of interest that only compounds over time.

Moreover, accumulating debt can serve as an anchor, weighing you down and hindering the pursuit of dreams like freelancing or starting your own business. If you’re contemplating the leap into freelance work, I invite you to explore my post on Freelancing 101: A Beginner’s Guide.

3. Not Saving for Emergencies

I used to think, “I’m young; I don’t need an emergency fund.” However, life proved me wrong—unexpected bills, family needs, and laptop repairs arose when I least expected them. Because I hadn’t saved any money, I had to borrow or sell my belongings at a loss.

Key takeaway: Establishing even a modest emergency fund can significantly alleviate financial pressure. Setting aside 10-20% of your earnings can safeguard you against unexpected financial challenges.

4. Ignoring Investing Early

If I could turn back the hands of time, I would begin my investment journey at the age of 20. At the time, I mistakenly believed that investing was an activity reserved exclusively for the wealthy or something that was meant for a later stage in life.

As a consequence, I forfeited invaluable years of potential compound growth that could have significantly transformed my financial future.

Lesson learned: The importance of starting early cannot be overstated. Investing modest amounts at the beginning is far more advantageous than waiting to invest larger sums later on. Just think: setting aside a mere $20 each month into mutual funds, ETFs, or stocks could lead to substantial growth over the years.

For those residing in Kenya, platforms like CMA Kenya offer valuable guidance on safe and effective investment options tailored to help you embark on this rewarding journey.

5. Chasing Quick Money Instead of Building Skills

In my quest for financial gain, I found myself entangled in a web of “get-rich-quick” schemes. From dubious mobile applications to deceptive online scams, I squandered both time and money in pursuit of shortcuts that promised effortless wealth.

What I failed to recognize during that tumultuous phase was the immense long-term value of cultivating marketable skills—skills such as writing, coding, or digital marketing—that truly yield a sustainable income.

Lesson learned: Just as money can compound over time, so too can skills. The expertise I have honed in the realms of ICT and freelancing has opened more financial doors for me than any fleeting scheme ever could.

I even penned an article detailing the freelancing scams I nearly fell victim to—a cautionary tale that serves as a reminder of the pitfalls many newcomers encounter.

6. Neglecting Side Hustles

For a while, I relied only on my small salary. When expenses piled up, I struggled. I didn’t realize that side hustles could create an extra income stream to cushion me during tough times.

Lesson learned: A side hustle isn’t just extra cash—it’s security. Whether it’s freelancing, blogging, or selling products, that extra stream of income can be life-changing.

My own journey proves this. In fact, I wrote about how I juggle blogging, school, and side hustles—and why it’s worth it.

7. Not Talking About Money

Growing up, money was a “taboo” topic. I didn’t ask questions or seek advice because I thought it made me look broke or uneducated. That silence cost me years of trial and error.

Lesson learned: Talking about money is not a weakness. It’s wisdom. Learning from others—whether through mentors, blogs, or YouTube—can save you from costly mistakes.

8. Failing to Plan Long-Term

At the age of 22, I found myself entirely absorbed in the present moment, often dismissing thoughts of retirement, healthcare, and long-term stability. My mindset revolved around the belief that life was meant to be lived to the fullest in the here and now: “enjoy today, figure out the future later.”

However, as I quickly learned, that future inevitably arrives sooner than expected. I discovered that engaging in strategic long-term planning can significantly enhance one’s peace of mind in the present.

Lesson learned: Embracing long-term planning doesn’t equate to sacrificing enjoyment; rather, it’s about cultivating a harmonious balance between today’s pleasures and tomorrow's security.

Even a modest commitment to setting aside funds for retirement or investing in business opportunities can pave the way for a more comfortable and fulfilling life in my 30s and 40s. By making small, intentional choices today, I can create a robust foundation for my future, ensuring both enjoyment and stability.

Final Thoughts

My early 20s were filled with money mistakes, but each one came with a lesson. If you’re reading this in your 20s, you have the advantage of learning from my story. Avoid debt traps, budget wisely, start investing, and focus on building skills. And most importantly—don’t be afraid to talk about money.

If you're searching for practical advice on how to effectively manage your finances while navigating the world of freelancing, be sure to explore my detailed post on smart freelancer investments under $50. These seemingly small financial decisions can lead to significant growth and stability in your financial future. Trust me—when you make thoughtful choices today, they can compound into a wealthier tomorrow.

Remember: Money is not just about survival—it’s about building freedom for yourself and the people you love.

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If this post helped you, explore more of my personal finance lessons and freelancing tips that can change your financial future.