Financial Mistakes to Avoid in Your 20s

If you ask a typical 20-year-old what their financial goals are, they won't really be able to tell you. What Millennials know about the stock market, retirement funds, or even tax laws, is often abysmal at best. This is often why so many 30-year-olds still struggle despite having good salaries.

Truth be told, there are a lot of financial mistakes to avoid in your 20s. The problem is that most people don't really know to avoid them until they've actually made them. Here are some of the worst landmines every financially fit person should avoid during their most formative decade.

Adding Extra Debt to Your Student Loans

Most people who want to go to college find the attraction of student loans to be pretty hard to resist. Lenders offer lots of extra money for "living expenses," even to students who actually can afford keeping themselves afloat during their college years.

When you know you could just use those loans to fund a larger apartment or that cushy MacBook Pro, it's hard to resist getting them. A little loan never hurt, right?

Wrong. Student loans are the only loans that cannot be discharged via bankruptcy. That means that even if you go bankrupt, you still will be on the hook for those loans.

Interest on those loans can add up for 10, 15, or 20 years. That means that $2,200 laptop could end up costing $4,900 over the course of a 15-year loan—and if you're on hardship, that number could climb higher every year.

A better solution is to live as cheaply as possible, and to pay off those loans fast.

Everyone should invest in their 20s, primarily because time is on your side. With more time on your side, you get to reap better compound interest rewards as time goes on. The thing that keeps most from investing, though, is money.

That's no longer an excuse to commit one of the worst financial mistakes to avoid in your 20s. New apps like Stash, Acorns, and Robinhood allow you to invest in the stock market on the cheap.

Even if you only have $5 to spare, you can use that money to invest in your future. This will put you ahead of the game and also make your older self thank you.

Working with an MLM

Multilevel marketing, also known as MLM, happens to be one of the many industries that preys upon college kids and broke 20-year-olds. These are jobs that promise you wealth, then ask you to sell subpar goods to friends and family.

Those who drink the Kool-Aid of an MLM scheme often end up in deeper debt than before, along with a lot of people who no longer want to speak to them. As a result of the damage it does to your wallet and social network, this is one of the biggest financial mistakes to avoid in your 20s, 30s, and beyond.

You know how Family Guy had that song about credit card debt? It may have been catchy and a hilarious way to move along a plot, but there's a lot of reason to be very leery of using plastic for any payment out there.

Studies show that paying via credit card often means that the stuff you buy will end up being as much as 50 percent more expensive by the time you pay them off. This is because of compounded interest—and interest rates being as high as 29.9 percent for many cards.

The best course of action is to pay off credit card debt that you've already accrued, then to keep a zero balance. If you've already gotten a lot of credit card debt, you can use an app like Debt Free to help reduce the debt and avoid paying that much on your bills.

You went on shopping sprees you couldn't afford.

Whether it was a brand new pair of Gucci shoes or just one too many nights out, spending money you really can't afford seems to be one of the most common financial mistakes to avoid in your 20s.

Everyone seems to be enjoying their first years of freedom in a little luxury. Unfortunately, life is not a rap video and that can make things pretty darned rough once the bill hits you.

This is one of the more pressing finance mistakes to avoid in your 20s, simply because it has such far-reaching consequences. You need to keep a close eye on your credit score, primarily because it will be the factor that allows you to get credit cards, buy a house, or even refinance your student loans.

In many cases, your credit score is where you first notice signs of identity theft. Should any negative and false marks be posted, you do have the right to dispute them with credit bureaus and make it possible to live life again.

Apps like Credit Karma are a great tools that allow you to painlessly enjoy credit score monitoring and also give you a way to file tax returns.

Getting into Smoking

Though this may sound preachy, it's really not. This genuinely is one of the more dangerous financial mistakes to avoid in your 20s—or really at any point in your life. Smoking is a really pricey habit, as is any type of drug use. Smoking, though, is the most expensive legal habit you can have.

Right now, tobacco taxes can make a single pack of cigarettes cost as much as $14 a pop. If you have a pack a day habit, that means you're spending over $5,000 per year on smokes.

Smoking also affects the price of health insurance, with some states allowing fees for smokers in excess of 50 percent per month. In the insurance industry, this is called tobacco rating and it's perfectly legal to do.

The first thing you'll quickly learn in life is that a little bit of extra cash can make for an amazing lifesaver. Emergency savings often make or break your ability to stay afloat during the worst of times, and sadly, not many youthful people save up money.

Even if you have a stock portfolio, you still should have an emergency fund. The vast majority of Americans do not even have $1,000 saved up in their accounts. You can avoid being wrecked by disaster by simply using an app like Qapital to save up money automatically. Every penny counts!

Not Getting Insurance—If You Can Afford It

Because the Trump Administration has passed laws that raised the price of health insurance, not everyone can afford it. But, if you can afford it, you should buy some. Not having insurance you need is one of the worst financial mistakes to avoid in your 20s.

While you might be healthy now, it only takes one car accident to make you have to declare bankruptcy. Medical bills are absolutely brutally expensive without insurance. In fact, it's the leading reason behind declaring bankruptcy in the United States.

Call insurance companies and make a point of getting some. You'll thank yourself later on.

Budgeting is not always easy to do, and realistically, it's never fun. We all want to live in a rap video and be able to "ball out" whenever we want. However, that's not the way real life works. Unless we are the sons and daughters of billionaires, there's going to be a finite amount of money in our lives.

Budgeting is crucial if you want to be able to live a normal life. Not knowing how to keep a budget isn't good, either. That's why apps like Mint exist; they can help you learn and track your budget.

Marrying the Wrong Person

This is one of the most surprising financial mistakes to avoid in your 20s, simply because no one thinks of love and money to have much to do with one another at all.

Who you marry can make the difference between living comfortably for the rest of your life and dying on the street. Many people out there claim that their biggest mistake in life was marrying the person they did, simply because divorce was so expensive.

Think twice before you put a ring on it, seriously.