Common money mistakes in your 20s

The defining feature of money mistakes in your 20s is that they feel neutral. None of these decisions look bad in the moment. They look normal. And normal is expensive.

1. Leasing or financing a car you don't need

A new car is the single biggest asymmetric wealth destroyer for young adults. You're locking in $400–800/month of after-tax cash flow for something that depreciates 20% the moment you drive it off the lot. A used 3-year-old Toyota or Honda costs half as much and is 95% as nice.

2. Ignoring the 401(k) match

Every pay period you don't contribute enough to get the full match is a day you worked for free for your employer. If your match is 4% and you contribute 0%, you're turning down a 4% annual raise.

3. Lifestyle inflation that matches raises dollar-for-dollar

The trick isn't to live like a monk. It's to increase spending by less than income each time you get a raise. If you save half of every raise, you're effectively building wealth at the same rate as someone with half your income growth but all the savings muscle. Boring. Works.

4. Carrying a revolving credit card balance

Paying only the minimum on a credit card is how a $3,000 spring break turns into $9,000 you're still paying off during your 30th birthday dinner. Credit cards are fine. Revolving balances on them are not.

5. Not starting

Compounding is unforgiving to late starters. Starting at 25 instead of 35 roughly doubles your end-state wealth at 65. The specific investment doesn't even matter that much. Starting matters more than optimizing.