From social media influencers to ChatGPT to your crypto-bro cousin, it can feel like everyone has an opinion on the best way to make (and spend) your money. It’s tricky enough to make it in your twenties, and that’s not even taking into account dwindling paychecks, rising inflation, crippling student loan debt, and the gig economy.
2026’s financial landscape is complex and volatile. But the basics of savings, investments, and debt management have not changed. By avoiding common mistakes and focusing on sustainable habits, you can take steps toward your financial security.
Common Financial Mistakes
1. Lifestyle Creep
It is a challenge to ALWAYS spend less than you earn, especially when those first paychecks hit. However, “keeping up with the Joneses” (or spending too much on the TikTok shop) is a trap that can put you in debt or eat into your savings.
2. Buying a New Car
One of the worst mistakes you can make in your 20s is purchasing a brand-new car, which is a depreciating asset. Expensive new cars come with a much higher bill, not just in the initial loan and interest, but in your insurance costs, taxes, and repair prices. It’s almost always better to consider reliable, basic transportation and put that money toward savings or appreciating assets.
3. Relying on Debt
Incurring too much debt early in your career is a common but devastating mistake. Excessive debt shifts your focus to paying bills (i.e. paying others) instead of saving (i.e., paying yourself). The other mistake is trying to ignore your debt. Putting your head in the sand only compounds the problem… as tempting as it can be!
So, What Should You Do Instead?
Create a Budget
While not flashy, a budget is the most crucial first step in managing your money, regardless of income status or income consistency. A budget doesn’t have to be a complex process or elaborate spreadsheet. First, you need to know how much you earn. (Make sure to account for all your income streams and side gigs!) Next, you’ll figure out how much you spend. Use a budgeting app or review your bank statements to see what you are actually spending, and not just what you think you are spending.) Finally, you’ll pull it all together. You can use a free app, a spreadsheet, or the back of a napkin. Staying within your actual income, write down how much you need to spend on essentials, then create goals or limits for other categories such as savings, eating out, or travel. The hard part is what comes next: living within your budget, course correcting as needed.
Create a Savings Plan
Your budget should prioritize a savings component (“pay yourself first”) before other expenses. The primary goal recommended is to save 10% of take-home pay in an emergency savings account until this account reaches 3-6 months of living expenses. This prepares for unexpected expenses without derailing the budget or resorting to high-interest debt.
Manage Debt
Realistically, most of us have some debt, whether that is student loans or other, more aggressive high-interest debt. The worst thing you can do with debt is pretend it’s not there. Make sure you’re actively managing your loans. You can approach repayment by working backwards. Set a payoff date and calculate the required monthly payments needed to pay off by your desired payoff date. Start with the highest interest debt first and avoid only making minimum payments to prevent extended repayment periods.
Invest in Your Future
Investing allows you to take advantage of compounding interest. For example, investing $10,000 every year from age 20 to 40 would turn a $200k initial investment into a $5 million retirement account on your 70th birthday. (Assuming an 8% rate of return.)
Make sure you are contributing to retirement plans, ESPECIALLY if you have access to a 401(k) or similar match through your work. If possible, you can also invest in a brokerage investment account for future goals like a home purchase. If you’re looking for easy, low-stakes investment strategies, consider systematic monthly contributions to a mutual fund (preferably large US stocks). Consistency and discipline in saving are more important than market timing.
What about Credit Cards?
While the use of credit cards is a controversial topic, a credit card can be a good investment if managed responsibly. That means paying the full balance every month and only using it for necessary expenses, rather than “free money.” Responsible use builds your credit score, which can lower interest rates on loans, as well as insurance premiums.
Take the First Steps
Navigating finances in your twenties can feel like drinking from a fire hydrant of decisions and risks. But addressing these common mistakes and taking the first steps towards financial stability will set you up for success.
And you don’t have to do it alone! A financial advisor can help you with any of these steps, from making a plan to address your debt, to creating an alternatives investment portfolio. (Just be sure you are working with a fiduciary. Fiduciary advisors like Greenwood Capital have legal and ethical directives to only act in your best interest.)
Ready to get started? Reach out today! We never charge for initial consultations.
John W. Cooper, CFP®
Senior Private Client Advisor
A native of Greenwood, John offers expert guidance and support to families and individuals. He provides comprehensive wealth management services such as portfolio allocation, insurance analysis, and retirement planning.
After helping his clients identify their goals, John will put together a comprehensive financial plan, tailored to each client’s investment suitability, risk tolerance, time frame, and personality. It serves as a map to help clients reach their goals: to lower taxes, preserve and protect assets, create a qualified retirement plan, or leave a legacy behind.
The information contained within has been obtained from sources believed to be reliable but cannot be guaranteed for accuracy. The opinions expressed are subject to change from time to time and do not constitute a recommendation to purchase or sell any security nor to engage in any particular investment strategy. Investment Advisory Services are offered through Greenwood Capital Associates, LLC, an SEC-registered investment advisor.
Excerpts from or links to this article on the Greenwood Capital Insights page have been included in Greenwood Capital social media pages and distributed Greenwood Capital newsletter. As is the nature of social media, the general public is able to post comments and/or “likes” in response to these excerpts and/or links. These comments are unsolicited and are posted by either clients or non-clients, which could be interpreted as client testimonials or public endorsements, respectively, and no cash or non-cash compensation is provided. A conflict of interest could exist related to unsolicited posts as Greenwood Capital and its investment adviser representatives could indirectly benefit from these posts.
