As a young professional with a new steady source of income, there are a few mistakes you might be making with your money. How you spend and how you save in your early years will greatly influence your financial stability in your 30s and 40s.

Avoid these ten mistakes in order to build healthy money habits and secure your financial future.

Spending all your disposable income

As a young professional, your first steady paycheck will probably go poof faster than you might expect. It may seem like a good bit of money on paper, but in reality, it’s important to pay close attention to your personal budget and disposable income. After you deduct all your cost of living expenses, it’s important to properly budget the amount you have left to spend.

If you end up spending literally all of your money on lunches, outings, and cool tech gadgets, you’ll miss out on the benefits of opening up a savings account, investing in your retirement fund, and more. So save up at least a portion of your disposable income for the things that will stabilize your finances.

Having an insane cost of living

It’s great to live in a big city, but the rent can take its toll on your bank account and paychecks. If you have a really high cost of living, you might be prohibiting yourself from having disposable income to spend on social activities and hobbies, as well as limiting the amount of money you can save.

Consider how you want to spend your money, and whether the price you pay for cost of living is worth the things you’re foregoing. Splitting the cost of an apartment with three or four friends can be a great way to live in a great location while not keeping you from having disposable income.


Being too rigid with your savings

On the flipside, there are plenty of young professionals who go to the extreme when it comes to saving money. Don’t let that be you. Your 20s are a time of flexibility, before the responsibilities and aches of age take their hold. Don’t be afraid to divert some savings for a trip backpacking through Europe or exploring the Middle East. Pay a bit of extra money each month for conveniences like a gym membership.

Do the things that will make you happy and enhance your standard of living while saving an appropriate amount of money. Don’t sell today for tomorrow.

Focusing on material goods

Your mileage with this one will vary depending on your personality and interests, but a lot of people rush to buy stuff when they start making an income for the first time. While the latest phone and best furniture are nice things to have, don’t forget to set aside your disposable income for experiences -- vacations to new places, learning new skills, experiencing the arts. And experiences lead to happiness. Science proves it!

Ignoring retirement

You’re in your 20s! Why should you care about retirement? It’s more than 40 years away, after all.

The bottom line: you only have a finite number of years to save up for retirement. If you spend your 20s ignoring your retirement fund, you will have spent a quarter of that finite number of years making little progress on securing your retirement finances. And you’ll have to increase your savings & investment in your 30s, 40s, and 50s far more than you might be comfortable with, just so you can catch up.

Build a habit of focusing on your retirement early in your life. Your future self will love you for it.

Ignoring your college debt

Your college debt is probably the biggest elephant in the room when it comes to your finances. Plenty of horror stories exist of broke graduates who have had their wages garnished and finances ruined because they still had college loan debt and didn’t properly plan around it.

Start paying off that debt immediately. Don’t go for tricks and tactics that will have you deferring your debt if you can afford to pay the monthly plan. And make sure you pay off the principal of the loan rather than the interest if you decide to pay additional money each month. Pay down your college debt as fast as you can so you can lift that burden off your shoulders.

Racking up credit card debt

Credit cards can be dangerous if they’re not used properly. They’re not a blank check for you to spend more money than you have. You still have to pay off the amount you spent, and if you fail to do so, you’ll end up paying even more in interest.

Open only one or two cards to limit the amount of credit you have to work with. Pay off your entire bill each month to avoid interest charges. And don’t let the debt pile up. That small balance on your credit card can quickly turn into a giant mountain if you aren’t paying attention.

Not saving enough for an emergency fund

You should strive to create a rainy-day savings account of 6-8 months of your cost of living. A lot of people know that they need this emergency fund, but trick themselves into thinking they spend less than they actually do every month. Be honest with yourself about your cost of living and all of your expenses when trying to calculate how much money you want to set aside. Otherwise, if the unfortunate does happen and you find yourself without employment for a long period of time, you’ll have to dramatically pull back on your expenses to adjust.

Choosing salary over learning & happiness

Plenty of job offers will come to you in your 20s. Some will give you great salaries and others won’t. Sometimes, you’ll have a choice between two offers. One will be the perfect job at the perfect company, but it might offer substantially less in the way of salary. The other will be an okay job at a company you don’t care about, but the salary will be great.

Later on in your life, the logical choice might be the larger salary, but in your 20s, it’s important to invest in yourself as a professional and as a person. If you know you’ll learn more or be significantly happier at a lower paying job, take that leap. Treat the salary difference as an investment in your career development and in your satisfaction. You’ll be surprised how much more rewarding it is when you love what you do and set yourself up for future career advancement.

Not investing in your health

As a young person, you probably feel invincible. You don’t have the aches and pains of age. Yet. But if you ignore your health in your 20s, you’ll pay the price in time.

Take advantage of preventative health screens on a regular basis. Get yearly checkups at your doctor. Get your teeth checked and cleaned regularly. Live an active lifestyle. Eat healthy. You’ll not only feel better today, you’ll be building habits that will benefit you for life.

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