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Want to know the most common money mistakes to avoid in your 20s, 30s, 40s, and 50s? Look no further, I have the list for you right here.

We all make mistakes, but the important factor at any age is our resilience when we see a problem. That being said, there are certain money mistakes to avoid at each age.

Before we dive in, though, let’s start here: Your money is not your worth.

I firmly believe that. Money will make you feel unworthy when you let you let it control you, and you can make your life substantially easier by making decisions with your money to accomplish your big dreams.

The connection to Money Shame

We feel money shame when our spending is incongruent with what we make and we don’t close the gap to live within our means. We think we need the lifestyle to feel fulfilled, but living on debt is a trap. The earlier you understand that your value as a person is intrinsic—that you are the one driving the decisions that can make or break you financially—that is where you find your power.

If you are in your 20’s and reading this, congratulations! You have an entire lifetime to get it right, and a few small changes now can positively impact the trajectory of your finances.

If you are in your 50’s, it’s not too late! It’s never too late to take control of your money and there is no time like the present. I don’t want you to feel like you have failed or that you should have known what to do before. Our schools do not adequately prepare adults for financial success. If your parents weren’t the best with their money or you didn’t major in finance, you have been doing your best against banks who offer easy credit and mixed messages about what you need to be successful.

You are faced with different financial challenges depending on your age. I’m going to cover some of the red flags most common in each decade.

Money mistakes to avoid in your 20s (and the impact of big life changes…)

Money Mistakes to Avoid in Your 20s 30s 40s and 50sIn your 20’s, you are still figuring out who you are and what you want to do with your life. The earlier you learn to estimate the financial impact of decisions you make, the easier it will be to weigh and prepare for those decisions.

For example, high school seniors often think that they will easily pay off the money they borrow for college with the big salary they land after graduation. Realistically, that salary will be entry level and you will have other significant expenses when you start out. By the time they take that first job and receive that first bill, it’s too late. A little digging before the college decision is made could help you mitigate a financial burden.

There are many life and bank account-altering choices that fall in your 20’s and have the potential to impact you for decades.

To take out school loans, or not to take out school loans…

Say you make it through school without taking out big loans. When you start that all-important first career job, you need everything. You want furniture for that apartment you just rented, clothes for the office, maybe even a car to get you there, and you haven’t seen a first paycheck yet.

Many graduates feel like they have arrived and need all the trimmings of success when they would be better off starting with a mattress and a reliable used car. Inflating your lifestyle is a money mistake to avoid. No one ever says, “I really wish I had spent more of my disposable income when I was younger.”

The money you see from that first paycheck will be after taxes, health insurance, 401K deductions, etc. You may be surprised what’s left over. Get comfortable living within that number instead of putting yourself in the position of needing to juggle just to get through the month. Without a family to provide for or a partner to plan with, you have the opportunity to live cheaply and save. It doesn’t ever get easier to live on less than when you are just starting out.

Higher stakes and money mistakes

When you become serious with a partner, skipping conversations with that person about their financial plans is a big money no-no. It only takes one person who wants to spend freely to derail your financial goals.

Many couples will walk down the aisle in their twenties, and while wedding planning is exciting and hyped as “your day,” be realistic about the tradeoffs for spending a huge amount of money on a big party. There are few other times in life when someone would consider blowing tens of thousands of dollars they don’t have, but for some reason, saying “I do” makes otherwise rational people feel like they have a free pass.

Couples who foot the bill for a lavish wedding may find themselves unable to come up with a downpayment for a house afterwards. Starting out married life with huge debt from a party is a strain on the relationship, especially if it wasn’t something you both felt was a priority. This is the first of many financial decisions you will make as a team. Don’t underestimate the benefit of starting life together unencumbered by debt.

Starting a family is also a huge expense. When considering all the ways a baby will change your life, many couples don’t think about the money aspect. Families spend an estimated $233,610 to raise one child.

Saving and other adult behaviors

You are just getting started and retirement feels miles away! But the habits you form today can set you up for a much easier future. If your employer offers a retirement plan that they also contribute to, invest up to the employer match or you are turning down part of your compensation. If your employer matches up to the first 3% that you invest in a 401K, and you don’t put aside 3%, that’s like saying, “that’s fine, I’ll just work for $15 an hour instead of $16.”

A big tip for your 20’s, sometimes it seems like 3% is nothing. Like it’s not worth it to set up these small contributions when you have so many other things competing for your dollars. Of course, more is always better, but the beauty of compound interest is that when you start investing in the stock market in your 20’s, you have time on your side. If you can keep your hands off, that money will grow. And it’s the best kind of investment—small short-term sacrifice for big rewards long-term.

Make sure you have renters and health insurance. Renters insurance is very affordable, and keeps you from unnecessary risk. Start building up an emergency fund.

Not sacrifice

To be clear, you should take that job in another city, celebrate life’s big moments and start a family! I’m not saying you have to play it safe. But it is important to plan and manage the financial aspects so you can achieve your dreams while also living within your means and maintaining good credit.

Starting out in a new city, getting to know people and dating, it’s easy to eat every meal out and spend a lot of money on socializing. You are in charge of your own financial destiny. Take a look at your monthly spending and see if you are comfortable with the percentage of your take home pay that goes towards drinks, dinners, and entertainment. Think about the things you hope to buy in the next few years and whether your fun money is eating away at your big dreams.

Credit is easy and dangerous. If you are leaning heavily on credit cards to fund your lifestyle, you need to stop now. Building good credit should be one of your main goals. If you are making late payments or missing payments on any of your bills, it’s time to come up with a plan.

Money mistakes to avoid in your 30’s

Coming into your 30’s, you have already faced many financial decisions. If you are struggling with high interest debt, tackling it should be your biggest priority.

The biggest challenge in your 30’s is avoiding lifestyle creep. The Joneses are getting a bigger house and you want one for your growing family too. If you can avoid being house poor, you will buy yourself financial flexibility.

Lenders will loan you far more money than you can comfortably pay. They will tell you that you can handle a mortgage that is up to 28% of your gross monthly income, and interest rates are low, so you can get a lot for your money. But bigger houses come with more expensive taxes, homeowners association dues, lawns that have to be maintained, space that has to be heated, cooled, and cleaned. If you stretch to live in a neighborhood with wealthier families, now you have ongoing pressure to maintain an image.

But what about the kids?!

Ah, kids. We want them to be happy! The activities, sports, birthday parties are endless, and they want all the gadgets and clothes. Of course you will indulge them to an extent, but make sure you are prioritizing investing.

Sometimes parents feel like they have to say yes so their kids have everything their friends have. Your kids will ask until you say no. They don’t understand the financial strain unless you tell them. You are the adult. It’s healthy for them to know that you can’t afford everything. You aren’t a money tree.

Any income growth should be reflected in your investments. You should start a 529 account for college savings. You should never reach a point where you can’t afford to save because of your daily expenses.

It’s also important that you put together a plan for taking care of your family if something should happen to you, including a will, life insurance, and disability insurance. No one wants to think about worst-case scenarios, but when you have a family, it’s your responsibility to prepare  for any circumstance.

Money mistakes to avoid in your 40’s

Of course, if you have high-interest debt, as at any other age, it needs to be addressed. And you need to prioritize saving for retirement. These are big money mistakes to avoid at any age.

It can be tempting now that you see a large balance to raid your retirement for a home remodel or shift your strategy to prioritize for college expenses that are coming closer. Some people see the end in sight for their mortgage and want to divert retirement money towards paying off that biggest monthly bill. These are almost never good ideas.

You can borrow for college, but not retirement. If you borrow from retirement for any reason, you will lose the momentum and benefit of compound interest.

If rates are favorable, it can make sense to refinance your home to a shorter duration mortgage, 15 years instead of 30. But it is not in your interest to refinance for another 30 years for a lower monthly payment. You will drag your payments out into retirement.

Revisiting your emergency fund

Revisit your emergency fund to make sure it is sufficient to cover any big life changes. As your income has changed or your family has grown, you may need more set aside.

If you haven’t already, start conversations with your parents about their finances and health. You are in the sandwich generation, where you find yourself caring for children and aging parents simultaneously. Consider your own estate long-term and how it relates to these responsibilities.

Unfortunately, many couples divorce in this stage of life, so you should be sure you are protected. Don’t fall into the trap of letting one spouse handle everything. Make sure you both understand the ins and outs of your revenue and expenses. Check in on budgeting and family spending, especially any big purchases.

By now, you and your spouse should be having regular money discussions. If you have become complacent, rekindle those talks. You will have big decisions to make together even as a strong couple. It’s in everyone’s interest to maintain a comfort level with financial topics.

Money mistakes to avoid in your 50’s

The biggest myth of your 50’s is that it’s too late. Too late to do anything if you haven’t already planned for retirement. A late start is better than none, and the steps you take over the next 15 years will give you options and prepare you for the best outcome.

Many people in their 50’s underestimate the cost of aging parents and adult children. Seeing boomers working into their 70’s and even 80’s, you may assume that your income will continue to grow and you have years of work ahead. While your best career years may be on the horizon, be prepared for an alternate reality. Many people’s plans change in this stage of life for a myriad of reasons, and job loss can be harder to bounce back from. You may choose to step back from work because of challenges with aging parents or because you just need a break.

Prioritize you

Be careful of over-spending on your kids. There are many options for higher education that don’t require a huge debt load. And if your kids do borrow, they can get lower rates than you can on their behalf. I talk more about college decisions here.

Sometimes it’s hard to cut the purse strings with adult children, and you don’t want to see them struggle. But consider whether you want the burden of being financially dependent on them in 20 years. That could be your reality if you boost them financially at the cost of your own retirement.

If you are still carrying debt, make sure any plans you make to tackle it are aimed at eliminating the right kind of debt. High interest debt should be addressed before paying off a mortgage. Paying off low-interest mortgage debt in lieu of saving can risk your retirement. There is still time to grow your savings and in your 50’s you are able to set aside more to your IRA with make-up contributions.

Hands off!

The worst money mistake in your 50’s is making early withdrawals from retirement! You don’t even need to be investing very conservatively yet. While you don’t want to overestimate your future earnings, you also shouldn’t underestimate your years left.

People believe they will need less income in retirement. You will have paid off the house…the kids will be gone. Check. Check. But you need to prepare to support yourself for another 30 years after you retire. The simple fact is that social security is not going to cover it.

What do seniors spend their money on? You will  have more free time, and if you are healthy, you’ll want to do things to fill that time that cost money. And if your health takes a turn, well, there are costs associated with that also.

Prepare

In your 50’s, review your insurance and estate plan, and explore long-term care insurance. Nearly half of all people over 65 will need some sort of nursing care, and even if it is only the last couple years of your life, the cost can easily top $100,000 a year. Often for couples, if one spouse requires any palliative care, the other is left with depleted finances to cover several more years of life.

How are you doing? Are you on track? Were there surprises here? If you are getting a tax refund or stimulus check, I hope this inspires you to get a solid start on paying down high-interest debt or funding that retirement to boost the habit. It’s tempting to take any windfall, whether from the government or inherited money, and blow it on something fun. But if you use those funds to strengthen your financial position, you make more room for fun on the regular. Being in control of your money allows you to spend on fun things when you want. Not just because you were lucky!

Securing your future and living now…Does that sound like the kind of freedom you want in your life? Join the discussion at the Money Circle, where you’ll find others building that life.

Tammy Lally

Tammy Lally

I BELIEVE MONEY IS NOT YOUR WORTH. Tammy Lally is an author, speaker, and Certified Money Coach (CMC). She helps others master their finances by first conquering their emotions around money, then by creating a comprehensive financial plan. She brings decades of experience and endless love to her bulletproof process for money mastery. She is the author of the book Money Detox, and her TED talk on Money Shame has over 2 million views.

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