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How To Manage Your Money: The Biggest Financial Mistakes Of Your 20s, 30s and 40s

Lindsay Tigar  |  May 28, 2020

From budget busters (too much house) to savings missteps (not having an emergency fund), here are the money missteps to avoid at every age.

It’s only a number, but age makes a difference in so many aspects of life. From career goals to relationship priorities to our fashion tastes (BRB, having flashbacks to some of the cringe-worthy getups I wore back in the day!), each new decade presents new challenges — and opportunities. And almost all of them impact how to manage your money.

Here’s a head’s up on some of the biggest financial hurdles you’re likely to face in your 20s, 30s and 40s and advice on how to handle them:

Money in your 20s

Fresh out of college, ripe with student loan debt and faced with the task of building a life from the ground up, our 20s are equal parts exciting — and terrifying. While the concept of “adulting” is a meme, in terms of money matters, the more mature of a perspective you can take in the first stages of making money, the better off you’ll be in the years to come.

Failing to contribute to and invest in a 401(k)

Retire — wha?! It’s hard to imagine what life will look like in your Golden Years when you’re a young professional with a meager salary that barely covers the necessities right now. Even so, if you’re given the option to opt into your company’s 401(k), pony up and do it, says CNBC senior personal finance correspondent Sharon Epperson.

“If you want to be able to stop working one day on your own terms, you should start contributing as much as possible to retirement savings as soon as possible,” Epperson says. By not preparing when you are younger, you’re making a huge financial mistake.

To get started, contribute at least enough to get any matching savings your company offers. After that, Epperson recommends saving 10% of your annual salary (including the company match) to begin, and gradually increasing your savings rate to 15% as your income grows.

Overpaying for housing 

As tempting as it may be to splurge on the larger apartment or purchase a home with a very small down payment, it’s not in your financial best interest, says personal finance author Stefanie O’Connell Rodriguez. “When possible, living with roommates or at home for a few years can give you an important opportunity to prioritize your financial resources toward building your financial foundation,” she says. Knowing how to manage your money when it comes to housing means remembering that your situation isn’t forever. And at this stage in your life, the savings makes a significant impact on your bottom line: “A 50 percent reduction in your housing cost, by having a roommate for example, frees up far more room in your budget than cutting a couple of lattes ever could,” she says.

Not having a game plan for debt

Unlike some problems that seem to take care of themselves, ignoring debt is a huge mistake, and quick way to end up in financial ruin. Though it’s a lot to process when you’re still learning the ropes of budgeting and money management, Epperson stresses the importance of creating a plan for paying down debt, fast. “Carrying too much debt and not paying down that debt will impact your credit score,” she says. “If you default on a loan it can also ultimately result in major legal and financial implications, which could follow you for years to come.”

Getting started can often be the greatest hurdle of all, so Epperson suggests looking into income-based repayment plans that allow for extended payoff periods and sometimes, lower interest rates. While it may take a decade (or more) to get through it, putting a step-by-step process will help light the path to a debt-free future.

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Money in your 30s

Biggie was right: Mo’ money, mo’ problems. Knowing how to manage your money can get complicated in your 30s. Regardless of whether you pick the spouse-and-kids track or the solo-and-lovin’ it route, this is the decade when adulting and retirement are forced to have a serious conversation. By now, you probably have some long-term savings, a stable-ish career and maybe even some kiddos and a house you own! It’s easy to stay steeped in the day-to-day money stuff. But don’t forget to step back and take in the bigger picture, too.

Not being ready for an emergency

You’ve built a nice life for yourself. If you don’t have an emergency fund, you’re putting it all at risk. At this stage, a rainy day emergency fund is critical for paying for unexpected medical bills or home costs and repairs. How to build it? “Automate a percentage of your paycheck to go straight to your savings each month. Find the highest-yield savings account possible, put the money in there and then don’t touch it,” Epperson says. “If you don’t see it, you won’t spend it.”

Letting your partner handle the money

Some people dig finances. Others, well, not so much. Some prefer to let a partner take care of the “money stuff.” But you still need to be plugged into what’s going on with the household finances, says Rodriguez. “Even if you leave the workforce, it’s important that both partners be involved in the process of making household financial decisions so that both partners feel equal ownership over the finances and so that both partners are equally capable of managing their financial lives on their own should the need arise.”

Money in your 40s

By now, you’ve been working for quite a while and, financially, are hopefully in a place that feels somewhat comfortable. This is not the time to get complacent and cut back on saving or investing. This is the decade to double-down as you envision retirement a little bit up the road.

Ignoring life and disability insurance.

The 40s can be financially draining for those who are still taking care of children and also providing care for aging parents. Everyone’s situation is different, but if your mom or dad starts to depend on you for their wellbeing and budget, it’s time to have candid conversations about financial matters moving forward. The same goes with past loans (your own and those you co-signed). “If you financially support aging parents, have debt you don’t want to pass along to survivors, or have used a co-signer for a purchase or have any dependents, it is important to consider life and disability insurance,” Epperson says. “You may be young and healthy, but preparing for the unexpected will secure your financial future, and also the financial future of your loved ones.” Rather than thinking of it as a morbid topic, consider it a way to alleviate more heartache in the years to come.

Letting old 401(k)s stagnate

Hopefully your income has more zeroes now than it did in your 20s — and your contributions to retirement savings is increasing right along with it. Now’s a good time to make sure your investments are working hard for you. If you’ve worked for multiple companies, track down all of those old 401(k) accounts and combine the money. (To avoid triggering taxes, roll the money directly into an IRA.) It’s harder to effectively manage the investment mix when the money is spread over multiple accounts. Plus an IRA offers more investment options than a 401(k). The bottom line is to allow retirement to become a bigger priority since it’s getting closer and closer.

HerMoney Takeaway: We’ve just spent a lot of words to cover the financial mistakes women make. (FYI: Plenty of men make them too!) If you see your reflection in a few of the examples, don’t be hard on yourself. After all, you have to have done a lot of things right over the years — like earning a degree, landing a job at a company that offers a retirement plan, building a family and lifestyle that needs protecting — to even be in a position to make these money boo-boos. 

Take a moment to celebrate those wins. And then, vow to do one small thing tomorrow to improve your financial standing even more. Set up a separate high-yield savings account to start putting $20 a week into your emergency fund. Review a few household bills and see if you can lower them. Set a small financial goal with your partner

Put one task on your calendar and then join us in the HerMoney private Facebook group so we can cheer each other along! 


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