Mistake 3: Ignoring Your Credit Score

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Avoid Neglecting Credit Health

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Your credit score is out of sight, out of mind – until you need it. One big mistake is not checking your credit report or understanding your score in your 20s. You might unknowingly hurt it by paying a bill late, forgetting about a small medical bill, or maxing out a card, and shrug it off. But later, when you go to rent a nice apartment or finance a car, you get denied or saddled with a high interest rate because of those earlier slip-ups. Many people only “discover” issues on their credit report years after the fact. Another faux pas: closing your oldest credit card out of spite for the company or to “discipline” yourself – that can actually ding your score by reducing your credit history length.

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How to avoid it:

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Keep tabs on your credit report and score. It’s free to check your credit report annually (via AnnualCreditReport.com), and lots of apps or card companies give you a free credit score snapshot. Treat your credit reputation like a resume – you want it clean and strong. Pay all bills on time (even that $30 store card – a missed payment can hurt badly). If you rent, see if you can get rent payments reported to credit bureaus (some services do this, boosting your score). And before you close any old credit accounts, understand the impact. Often it’s better to keep a credit card open (perhaps cut it up if you must, but don’t close, especially if it’s your oldest account). By minding your credit in your 20s, you avoid the mistake of being handicapped by a low score just when you need it the most.

Mistake 4: Not Having Any Budget or Plan

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Avoid “Money Fog”

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Wandering through your 20s with zero budget or spending plan is a common mistake that leads to many of the others. It’s basically flying blind. You might feel like you’re doing fine until a big overdraft or a declined card embarrasses you. Or you realize at 29 that despite decent earnings, you have nothing saved because it all mysteriously vanished into takeout, bar tabs, and impulse buys. Not planning is a mistake because it often results in living paycheck to paycheck unnecessarily and missing opportunities to save or invest. It can also lead to accidentally overspending (oops).

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How to avoid it:

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You don’t need a strict allowance on every category (though some people love detailed budgets). At least sketch out a basic budget or spending plan. Know your fixed expenses (total them up: rent, utilities, car, subscriptions, etc.) and compare to income. Then decide how much you want to save/invest each month (pay yourself first!), and the rest is flexible spending. The act of planning just ensures your priorities (like saving, debt payoff) are met, and you know your limits on fun spending. Also track your spending for a month or two – you might be shocked where your money actually goes. That awareness alone helps curb mindless purchases. The key: any plan is better than none. Avoid the fog, have a roadmap. Your financial journey will be much smoother.

Mistake 5: Carrying On With Expensive Habits (Lifestyle Creep)

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Avoid Letting Expenses Inflate Too Fast

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As you start earning more in your late 20s, it’s tempting to upgrade everything in life – nicer car, bigger apartment, more nights out at upscale restaurants. This phenomenon is called lifestyle creep. It’s a mistake because it can eat up all the extra money you’re earning, leaving you no better off financially than when you earned less. For example, you get a $10,000 annual raise at 25… but then you move to a pricier apartment, take on a car payment, and suddenly your expenses went up $9,500 a year. You’ve effectively saved nothing from that raise. People look back and realize they’ve been working for years with little to show because every income boost was immediately gobbled by spending boosts. Another related mistake is not cutting back on certain expenses when you no longer need them (like keeping that pricey cable package you barely watch, etc.).

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How to avoid it:

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When your income increases, consciously decide how to use that money. A good rule: at least half of any raise or bonus goes toward savings, debt payoff, or investments. That way you do enjoy some lifestyle upgrades but also bank progress. Also, regularly audit your expenses. Are there subscriptions or habits that you’re paying for but not truly valuing? It might be daily takeout lunch or unused gym memberships. Trimming those can free up money without really hurting your happiness. The idea isn’t to deprive yourself in your 20s, but to avoid mindless spending increases. Keep your needs vs. wants in check. As long as you’re meeting savings goals, it’s fine to treat yourself – just don’t make treating yourself a default setting every time you earn more.

Mistake 6: Not Investing Early (Fear or Lack of Knowledge)

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Avoid Sitting Out of the Market

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Many 20-somethings shy away from investing. Maybe it sounds complicated or they fear losing money, or they assume “I don’t have enough money to invest.” As a result, they keep all their savings in cash or low-yield accounts and miss out on years of growth. This is a mistake because your 20s are literally the best time to invest – you have the longest runway. Even small amounts can grow significantly. For instance, not investing $100 a month in your 20s could mean giving up potentially ~$150k by retirement (assuming historical stock market returns around 7%). Another mistake is being too conservative (like only using a savings account for long-term goals) or the opposite – YOLOing into high-risk “get rich quick” schemes without understanding them (looking at you, random crypto tokens and meme stocks).

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How to avoid it:

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Educate yourself on basic investing – you don’t need to be an expert to get started. A simple strategy is to invest in a broad index fund or target-date retirement fund through an IRA or 401(k). You don’t have to stock-pick or time the market. Overcome the fear by starting small – invest a tiny amount and watch how it works. Use robo-advisors or apps that make investing user-friendly if that helps. The key is to just begin. You’ll learn by doing, and you can always increase contributions later. Also, remember that cash sitting idle actually loses value over time due to inflation. So not investing is effectively a slow bleed on your money’s purchasing power. Don’t let lack of knowledge be an excuse – plenty of free resources (including Kudos’ blog and recommended tools) can guide you. By avoiding the mistake of delaying investing, you’ll harness the huge advantage of time that you have in your 20s.

Mistake 7: Overlooking Insurance and Protections

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Avoid Leaving Yourself Unprotected

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When we’re young, we often feel invincible and may skip insurance or other protections to save money. “I’m healthy, I don’t need health insurance” or “Renters insurance is for other people, what are the odds my stuff gets stolen?” are common attitudes – and mistakes. Unexpected events can be financially devastating if you’re not insured. A broken arm without health insurance, a car accident with only minimal coverage, or a fire in your apartment destroying everything – these can set you back tens of thousands. Many young people also neglect disability insurance (often offered through work) which is crucial if you rely on your income. Another overlooked thing: not having at least a basic will or beneficiaries set – it may not hurt you financially in your 20s, but it can complicate things for your loved ones if something happens.

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How to avoid it:

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Insure yourself appropriately. Health insurance – non-negotiable, even if it’s a high-deductible plan with lower premiums, get something in place. If you drive, make sure your auto insurance is sufficient (liability coverage especially – you don’t want an accident bankrupting you). Renters insurance is usually very affordable (like $10-15 a month) and covers your belongings and liability – get it if you rent. If you have a job with benefits, take advantage of any disability insurance and life insurance if you have dependents or a spouse. Also, take five minutes to designate beneficiaries on any accounts like your 401k or life insurance; it’s easy to do and ensures your money goes where you want if the unexpected happens. By avoiding the mistake of skipping insurance, you essentially mistake-proof your finances against catastrophes. It’s not fun to pay for something you hope never to use, but it’s one of those adult moves that can save your entire financial future.

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Tip: While Kudos might not directly handle insurance, it can indirectly help you avoid a common insurance-related mistake: not using your credit card benefits. Many credit cards offer built-in protections like rental car insurance, purchase protection, or travel insurance. When you have Kudos, it reminds you which card has what perk. For example, if you’re renting a car, Kudos might suggest using your card that includes collision damage waiver. If you buy a new phone, use the card that offers cell phone protection. These perks act like mini-insurance policies that can save you money and hassle. Don’t overlook them – Kudos will keep you informed so you can take full advantage of protections you already have.

FAQs: Money Mistakes and Millennial Missteps

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I’ve already made some of these mistakes (credit card debt, no savings at 27, etc.). Is it too late to fix it?
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It’s never too late to turn things around. Recognizing the mistake is the first step. Start by creating a plan: if you have credit card debt, commit to a payoff strategy (and stop adding new debt). If you have no savings, make a budget that includes paying yourself first, even if it means tightening other spending. You’d be amazed how much you can improve your situation in a year or two of focused effort. Plenty of people have recovered from worse by their 30s or 40s. The important thing is to break the bad habit cycle now. Also, leverage resources – for example, credit counseling services can help with debt, or using an app to automate savings can jumpstart your emergency fund. Don’t dwell on the past mistakes; just use them as motivation to get smarter going forward. By 30, you could be in a completely different (better) place if you start today.

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What’s the biggest financial mistake most 20-somethings make?
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If we have to pick one, not saving and investing early enough is arguably the biggest, simply because time is such a valuable asset. You can recover from a shopping spree or a small debt, but you can’t get back lost years of compounding. That said, many might point to high-interest debt (like getting deep into credit card or personal loan debt) as a huge mistake as well, because it’s hard to dig out of and can derail your other goals. These often go hand in hand – overspending leads to debt and lack of saving. So, overspending (living beyond means) that leads to no savings and accumulating debt is the critical combo of mistakes to avoid. Master those and you’re ahead of most of your peers.

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Is it a mistake to prioritize investing over paying off student loans?
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It depends on the interest rate of your loans. If you have low-interest student loans (say 3-5%), it’s not a mistake to invest while paying those off slowly, because your investments might earn more than that in the long run. In fact, starting to invest in your 20s is very important. However, if you have private student loans at high interest (e.g. 8%+), it can be wise to knock those out faster – paying them off is a guaranteed return of that interest rate. A balanced approach often works: contribute enough to 401k to get match (investing), and direct extra cash to loans. The mistake would be doing nothing for retirement until loans are gone (could miss early investing years) or, conversely, investing a ton while ignoring a 10% interest loan (debt costs might outweigh gains). So evaluate your rates: if investment expected returns > loan rate, do both; if loan rate is very high, prioritize it more. Consider speaking with a financial planner if unsure – but generally avoid an all-or-nothing extreme on either side.

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What about spending on experiences in my 20s? I don’t want to miss out – is that a mistake?
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Life is meant to be lived, and your 20s often bring amazing opportunities – travel, concerts, friends’ weddings, etc. It’s not a mistake to spend on meaningful experiences as long as you aren’t sacrificing your financial stability to do so. In fact, experiences can enrich your life more than material things. The key is moderation and planning. If traveling is your passion, you can budget for it (e.g., save in a “travel fund” each month). Taking a big trip might slow down another goal slightly, but you can catch up. The mistake would be financing experiences on credit card debt or foregoing paying rent to fund fun – those consequences hit hard later. So by all means, enjoy and make memories in your 20s. Just try to plan and save up for the big-ticket experiences. You might also seek cheaper ways to do the same thing (travel hack with points – Kudos can help earn those!, or attend free events along with the occasional pricey concert). It’s about balance. You don’t want to reach 30 with great memories but also crippling debt. With a bit of foresight, you can have both memories and money.

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How can I tell if I’m living beyond my means?
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A quick litmus test: if you consistently can’t pay off your credit cards in full, or you have little to no savings despite earning an income, you’re likely living beyond your means. Another sign is if an unexpected $500 expense would derail your finances (meaning you’d have to borrow to cover it). Calculate your “savings rate” – what percentage of your income are you saving or investing? If it’s effectively zero (or negative, i.e., accumulating debt), that’s a red flag. Also, check your debt-to-income ratio (all monthly debt payments divided by monthly income); if it’s high (over ~35-40%), that indicates overspending relative to earnings. Living within or below your means would show up as being able to cover all expenses, save some money, and not rely on credit to get by. If that’s not the case, don’t panic – rework your budget, identify non-essentials to trim, and set up some auto-transfers to savings at the start of the month. Essentially, pay yourself first and then live on the rest. That flips the script and ensures you’re not overspending overall. It might require some lifestyle adjustments, but zeroing in on this now will prevent bigger sacrifices later on.