10 Money Mistakes to Avoid in Your 20s and 30s
The phrase “time is on your side” is never truer than when you’re in your 20s. You’re entering proper adulthood with the ambition to conquer the world, while experiencing the tug of war between wisdom from mentors and your desire to remember you only live once.
Finding that balance is challenging, but avoiding the following 10 common money mistakes can help you enjoy these decades while ensuring you won’t have regrets when you reach your mid-30s. Let’s count them down…
#10: Misusing debt or neglecting to pay it off aggressively
The more debt you have, the more you’ll play catch-up instead of getting ahead. Credit card interest rates hover north of 20%, while the average car loan in Canada is over 7.5%.
When roughly 46% of Canadian credit card holders carry a balance for at least two consecutive months, you can see how many dig holes that become increasingly difficult to escape. With limited income as you establish yourself in the workforce, eliminating debt becomes that much harder.
#9: Failing to build the foundation of a sensible budget
While your formal education may be ending, you’d be mistaken to think there aren’t a few more take-home assignments. You can’t control your money if you’re not measuring it.
Tracking your expenses shows you exactly where your money is going, so you’re not left wondering where it all went. Living off less than you make creates margin you can immediately use. A variety of mobile apps make budgeting easy—a discipline your older self will thank you for.
#8: Not having an emergency fund
The best planning won’t protect you from the unexpected, and we shouldn’t rely on family to bail us out.
Aim to maintain three to six months of expenses in liquid funds—easily accessible and separate from your regular accounts. High-interest savings accounts are great vehicles for emergency funds. Just read the fine print to avoid excessive fees, minimum balances, or withdrawal restrictions.
#7: Not taking advantage of compound growth
Once you’re debt-free with a budget and emergency fund, it’s time to reward your future self. Take advantage of your most abundant resource: time.
Even small contributions to tax-advantaged accounts like TFSAs, FHSAs, or RRSPs will compound dramatically. Consider this: $700 monthly starting at age 50 until retirement at 65 (with 10% annual growth) gives you $290,000. That same amount starting at 30 grows to over $2.6 million by 65!
Target investing at least 15% of your net income to maximize compound growth.
#6: Not taking retirement seriously—right now
In your 20s and 30s, retirement seems distant. You have immediate goals and want to enjoy your hard-earned money. Maybe you’re counting on an inheritance to save you down the road.
But remember: no one is responsible for funding your retirement except you.
The days are long, but the years are short. Retirement will creep up quickly. Among Canadians over 50, only 34% believe they can afford to retire when they want, 19% have no savings at all, and 25% have less than $5,000 saved.
Retirement should be as much a focus now as buying a home or starting a family.
#5: Succumbing to lifestyle inflation
Let’s say you got a raise from $50,000 to $60,000 per year. Congratulations!
What you shouldn’t do is immediately start living as if you make $60,000. Instead, increase your saving rate and avoid spending on items that might get Instagram likes but are quickly forgotten. Even better, if you have no credit card debt and the like, transfer the increased amount from your paycheque directly into your emergency fund or other savings account.
Practicing discipline and frugality in these early years sets you up for decades of success and wealth.
#4: Not earning money or networking in your free time
I get it. You’re working all day, and a side hustle seems like it would rob you of downtime with friends or relaxation.
Rather than focusing on what you’re sacrificing, consider what you’ll gain: additional income to pay off debt or invest, new skills, and a deeper social network.
You don’t necessarily need a side hustle that pays immediately. Consider networking with people you respect or aspire to emulate. It might cost you a cup of coffee, but you’ll benefit from growing your social net worth.
#3: Ignoring your outdated social media profiles
While building professional relationships, ensure your digital footprint is an asset, not a liability.
Update your LinkedIn profile with a current photo and accurate summary of who you are. And please ensure your other social media accounts are clean and professional.
Your digital reputation follows you everywhere. Expect peers and potential employers to look you up online—be ready when they do.
#2: Celebrating life milestones without a plan
The two greatest days of my life were marrying my wife, Marnee, and when my son Eli was born—both in my 30s.
What makes me equally proud is that we celebrated these events modestly without debt, knowing our long-term goals weren’t sacrificed. This allowed us to build our life’s foundation responsibly.
When your time comes, remember it’s the people and shared moments you’ll cherish, not the frills that accompanied them.
#1: Not meeting with an advisor
If you’re avoiding the other nine mistakes, hat’s off to you. The next step is equally important: meeting with a licensed financial advisor to discuss your unique goals.
You might ask, “If I’m doing everything right, why pay for advice?” Think of it this way: I take great care of my car, but I’d never skip appointments with my trusted mechanic who inspects everything under the hood to reduce the chances of unexpected surprises down the road. A good financial advisor provides compounding value over time, ensuring your plan stays on track.
Finding balance between enjoying youth and preparing for the future doesn’t have to be a tug of war. By avoiding these 10 money mistakes, you’ll build financial security while still enjoying the journey.
If you have questions I’m always here to help. Reach out anytime.
–
Adam Pearl
Investment Advisor
Polson Bourbonniere Derby Wealth Management | iA Private Wealth
Insurance Advisor* | iA Private Wealth Insurance*
7050 Woodbine Ave, Suite 100
T: 905-413-7703 | M: 905-413-7700 | adam.pearl@iaprivatewealth.ca
F: 905-305-0885 | iaprivatewealth.ca
This information has been prepared by Adam Pearl who is an investment advisor for iA Private Wealth Inc. Opinions expressed in this article are those of the Investment Advisor only and do not necessarily reflect those of iA Private Wealth Inc. iA Private Wealth Inc. is a member of the Canadian Investor Protection Fund and the Canadian Investment Regulatory Organization.
*Insurance products are provided through iA Private Wealth Insurance, which is a trade name of PPI Management Inc. Only products and services offered through iA Private Wealth Inc. are covered by the Canadian Investor Protection Fund.