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4 Worst Financial Mistakes Young People Regret & How to Avoid Them

Close your eyes for a minute and picture yourself at the age of 90, looking back on your life – and, in particular, your financial choices. Which decisions do you think you’ll be happiest about? Which ones do you think you’ll regret?

Those are the very questions that Claris Finance asked 2,000 people in a 2016 poll. The respondents said their best financial decisions included going to college, buying a home, saving money, and dealing with debt. These are all useful things to know if you’re facing the same kinds of decisions in your life.

In some ways, though, you can learn even more from what these people considered their worst decisions. Looking at these can help you avoid making the same mistakes they did.

The Worst Financial Decisions You’ll Regret Later

In general, people said their worst decisions involved either spending too much or saving too little. They regretted wasting money on frivolous things, especially if they went into debt to do it. They also regretted putting too little of their money into savings and investments that could have helped them build up wealth. Of course, these bad choices are two sides of the same coin, since the more you spend, the less you save.

1. Not Saving Enough

The number one regret for people in the Claris poll was not saving enough of their monthly income. Nearly one out of four respondents said they hadn’t saved enough, and 6% stated that they hadn’t saved anything at all.

Failing to save makes your life harder in several ways. First, if you don’t save any of your income, you can’t build an emergency fund. That means if an unexpected problem comes up – like a job loss, a medical crisis, or a major car repair – you don’t have any money on hand to cover the bills.

Without this cash cushion, you have to either borrow money or go begging to friends and family. A single disaster can send you into debt that could take years to repay.

But even if you’re lucky enough to avoid a financial crisis, having no savings makes it harder to reach your long-term goals. Without a nest egg, you’ll never be able to make a down payment on a house, buy a new car, or even take a big vacation. If you have kids, you won’t be able to help put them through college. You certainly won’t be able to retire early – and you might not be able to retire at all.

The Takeaway: When you’re young, it’s tempting to live it up and blow through money like there’s no tomorrow. Some people even argue that you’ll regret it if you don’t live life to the hilt because you’re only young once. Saving, they argue, can wait until you’re older and richer.

But the experiences of the Claris respondents show otherwise. The truth is, there is a tomorrow, and you don’t know what it may bring. Disasters can happen at any age, and you need to be prepared for them. And while your long-term goals may be far in the future, the more you save now, the easier they’ll be to reach.

It absolutely makes sense to build a nest egg and stash it in low-risk investments. You don’t have to hoard every penny, but you shouldn’t spend every penny either. Set aside some money to enjoy life now, and save some so you can continue to enjoy life in the future.

Not Saving Enough

2. Racking Up Consumer Debt

About one out of seven people in the Claris poll said their worst decision was going into debt for “unnecessary purchases.” They weren’t upset about borrowing money in general – just that they’d borrowed when they didn’t really need to.

It’s an important distinction because there’s good debt and bad debt. Borrowing to buy a home or go to college can pay off in the long run, but borrowing to buy stuff you don’t even need, like vacations or jewelry, never does.

Once you’re in debt, it can be hard to get out. Figures from show that the average credit card balance, for people who regularly carry one, is $7,527. If they make only the minimum monthly payments on that debt at a typical interest rate of 15%, it will take over 11 years and more than $3,300 in interest to pay off. And that’s assuming they don’t add any new purchases to the card in the meantime.

Being unable to pay off debt was also a major regret for the Claris respondents. For 6% of them, failing to pay off a credit card was the worst decision they’d ever made. Another 3% said they had never managed to pay off all their debts.

The Takeaway: If you don’t have any consumer debt now, you’re on the right track financially. Just keep doing what you’re doing, and don’t get trapped in debt over things that aren’t worth it.

If you already have this kind of debt, work to pay off those credit cards as fast as you can. First, stop using the cards for nonessentials. Every new purchase just adds to your debt burden.

Second, set aside a fixed amount in your budget every month to put toward paying off your balance. To find this extra money, look for ways to trim your expenses, such as eating out less or cutting your cable.

If you can’t manage to squeeze a fixed payment out of your budget every month, use debt snowflaking instead. Whenever you have a small financial windfall, such as a tax refund, take that money and put it toward your credit card balance. Over time, these little “snowflake” payments can whittle your debt down to nothing.

Racking Consumers Debt

3. Overspending in Their Twenties

Even if you don’t get into debt, overspending is still a problem. The more you spend, the less you can save to put toward your other goals. About one out of seven people in the Claris survey said they regretted “living large” in their twenties – frittering away their earnings on trivial things like dining out, clubbing, or clothes.

Some of the respondents gave specific examples of unwise spending choices. For instance, 2% of them said they regretted spending money on alcohol or drugs. Another 2% regretted spending their college money on “something trivial.”

Of course, there’s a difference between reining in your spending and not spending at all. There is certainly some truth to the argument that you should enjoy your youth while you can, and not sacrifice today for the sake of tomorrow.

But it’s also true that your twenties are the time in your life when you have the fewest obligations. As you get older, you acquire responsibilities like a house and children, which eat up a lot of your income. If you don’t take the opportunity to save while you’re young and unencumbered, it will be much harder later.

The Takeaway: To have the best of both worlds, look for ways to enjoy your youth without spending all your money. You don’t have to sit at home alone every night, but you can look for cheap or free entertainment, such as hikes, free concerts, or hanging out and playing games. Instead of dining out all the time, you can have a potluck dinner with your friends – or look for ways to eat out on a budget. And instead of blowing your budget on designer duds, you can rock a secondhand-chic look in thrift-shop clothes.

Finally, if you want to splurge once in a while, spend your money on a great experience, such as a vacation. Research by happiness economists shows that people are usually happier when they spend their money on experiences rather than stuff. And, after all, which are you more likely to look back on fondly when you’re older: a beach trip with friends, or a $300 pair of shoes?

Overspending Their Twenties

4. Not Investing Enough

Lastly, many respondents in the Claris poll said their worst money decision was not investing enough. One out of 20 said their biggest regret was not investing more in general, and 3% specifically regretted that they had never invested in stocks.

Saving money is important, but it’s usually not enough to reach financial independence. To build up enough cash for retirement – or for other big goals like buying a house – you need to invest. Stocks, bonds, and other investments are riskier than keeping your savings in the bank, but they offer a much better chance to grow your money over time.

The earlier you get started as an investor, the better. Experts say it’s “time in the market,” not “timing the market,” that brings the biggest gains. In other words, the sooner you put money into an investment, the more you’ll end up with in the long run.

Here’s an example. If you start investing $100 a month today at 7%, in ten years, you’ll have more than $17,000. That’s $12,000 from the money you put in, plus another $5,409 from the money that your money earned. But if you wait five years to start investing, in ten years you’ll have only $7,300 – less than half as much.

The Takeaway: Start investing as early as you can. Even if you can only manage to set aside a small amount each month, those small sums can add up to big gains if you give them enough time. As the example above shows, skipping just two $50 nights out each month could give you a nice $17,000 nest egg in ten years. That’s enough for a new car, or maybe even the down payment on a starter home.

Not Investing Enough

Financial Lessons to Take Away

The Claris poll also asked respondents what advice they wished they could give their younger selves. Their answers offer practical tips on how to spend less and save and invest more – in short, how to avoid the mistakes they made. Here are their top five suggestions for younger people.

1. Keep a Budget

Nearly 30% of the survey respondents said the best advice they could offer would be to keep a budget. Setting aside specific amounts for all your expenses is a good way to keep a rein on your spending, which leaves you with more cash to save and invest. More than 40% of the people in the Claris survey said this was a saving strategy that worked for them.

It’s not that hard to make your first budget if you don’t have one already. The first step is to figure out how much you earn and how much you need for your regular monthly expenses. Then, set aside some money each month to cover once-in-a-while costs, such as insurance or medical bills.

Finally, add a line in your budget for “mad money.” This is extra cash that you can spend on just-for-fun stuff, such as music downloads or coffeehouse lattes. Allowing yourself a few little luxuries each month makes it easier to stick to your plan.

2. Stay Out of Debt

More than one in four Claris respondents said their best advice was to stay out of debt. They didn’t mention one type of debt specifically, but as noted above, consumer debt is the most harmful kind.

Fortunately, it’s also the easiest kind to avoid. All you have to do is refuse to buy anything you can’t afford. If there isn’t enough money in your bank account to cover the price on the tag, just walk away.

The Claris respondents aren’t the only people who think this is sound advice. It also shows up in an article at Business Insider, in which nine successful people discuss what they’d like to tell their younger selves about money.

Elliott Weissbluth, the CEO of the financial firm HighTower, says he would urge young people not to go into debt unless it’s for “a long-term investment that will pay off in the future.” That’s a lesson he learned in college when he decided to pass up a shiny new car – complete with a shiny new auto loan – for a used Jeep.

3. Eat Out Less

Nearly one in five respondents said their best tip for the young is to eat out less. This is one of the easiest ways to cut back on unnecessary spending. A look at restaurant meals shows that most dishes cost two to four times as much compared to the same food cooked at home. And the markup on drinks, such as coffee or soda, can be even higher.

Cooking for yourself doesn’t have to be a struggle. It’s easy to find recipes online, and even videos to show you how to make a dish. If you’re a hopeless cook, you can always rely on frozen meals or mixes. They’re pricier than cooking from scratch, but they’re still cheaper than eating out.

4. Use Automatic Deposits

It’s much easier to save when you don’t have to think about it. That’s why 13% of respondents say their best advice is to use automatic deposits at your bank. With this system, you can have your paychecks sent directly to a savings account instead of having to take them to a bank branch.

Direct deposits save you time, and they can help you save money too. Once your money is in the bank, it’s less likely to burn a hole in your pocket. You can still use it, but you’ll have to make an effort to withdraw it. That extra step forces you to think about what you’re doing instead of spending mindlessly.

You can use direct deposits in other ways too. For example, you can have part of each paycheck transferred to a separate account to serve as your emergency fund. Once that account is fully funded, you can start directing the money to an investment account instead.

5. Live a Minimalist Lifestyle

Finally, 11% of respondents would advise their younger selves to “live a minimalistic lifestyle.” This isn’t the same thing as depriving yourself. Instead, it means focusing on the things you love and not wasting money on things that don’t reward you.

It’s easy to throw away a lot of money by going along with the crowd. You end up buying the latest toys or clothes because your friends have them, without actually thinking about whether they make you happy.

Minimalism means spending more deliberately. You look at every purchase carefully and decide whether it’s worth the money to you. That way, every dollar you spend is done in a way that adds to your happiness.

Final Word

The choices you make when you’re young have a major impact on your financial future. If you spend your twenties on a wild spending spree, maxing out your credit cards, and saving nothing, you’ll enter middle age with nothing but some crazy memories and a pile of debt.

But if you choose to balance thoughtful spending with saving and investing, you can build happy memories and healthy finances at the same time. You can move on to bigger and better goals, such as owning a home or starting a business, knowing you have the money to meet them. And when you get to a ripe old age, you can look back on a life without regrets.

What’s the worst money mistake you’ve ever made? How would you advise someone else to avoid it?

Amy Livingston is a freelance writer who can actually answer yes to the question, "And from that you make a living?" She has written about personal finance and shopping strategies for a variety of publications, including,, and the Dollar Stretcher newsletter. She also maintains a personal blog, Ecofrugal Living, on ways to save money and live green at the same time.