5 Common Financial Mistakes Young Adults Make

Today's post is a guest post from my friend Ryan at Life Fresh out. Ryan is a young guy living in Boston learning first hand about the real world. He writes at LifeFreshOut.com, and hopes to share information he's learned since graduating from college that he wishes he knew before. Life, money, and careers are some of the topics he covers.

His blog is interesting and takes a different perspective; I highly recommend you check his blog out!

Young adults are notorious for making bad decisions in life. I’ve made plenty myself and I’m only a few years in. Here are five common ones I’ve seen myself and others make.

Underestimating the total cost of big-ticket items.

When I moved away from home to start my career, I had the car my parents and I shared while I was still at home. After a few months of working, I decided I wanted a change. I wanted to buy my own car. So after months of research, I went to a dealership and bought a brand new car. Now I had done quite a bit of calculations and decided that while a new car might not be the best financial decision, I could afford it. Here’s where I ran into a little trouble. All of my calculations were based on assumptions and not on reality. So when I got my first flat tire ever, I hadn’t planned on the uncommon tire size of the new car costing more to replace. Or that I would want to replace all four tires after my second tire problem a month later. Also, my previous car was a gas sipper and while the new one is still pretty economical, it’s not as efficient as I predicted. I underestimated the cost.


Not taking care of your health


It’s easy to just assume that your health is going to remain as strong as it was in your teens. As we get

older, inevitably we are going to develop some problems. And these problems will end up costing us in

money both in doctor visits and medication. At one point, I was feeling a little ill, but ignored it figuring it was nothing. Eventually it worried me enough that I went to the hospital. As I describe in a post, that ended up costing me big. A quick trip to the doctor earlier would have saved me a boatload.


Not paying enough/paying too much when buying small items

Many of us who read blogs like WLGYL are pretty conscious of our spending habits. We try to save where we can, but we also think that some things are ‘worth’ spending money on. Unfortunately, many times we get this wrong. I love to cook, so the kitchen is one area where I fall victim to this constantly. When I moved into my first apartment, I bought a large set of cooking utensils that came out to roughly $1 a piece. Thinking I was being frugal, I was pretty proud of myself. Obviously, these were pretty cheap, and many of the items bent and broke within a few months. I had to replace these and of course felt pretty dumb for wasting money. On the other side, I thought I would splurge and get a nice grill pan. I had never owned one before, so I burned a lot of food onto it within the first few weeks. Eventually it was ruined and I had to toss it.

It comes down to learning what items we should spend a little more money on, and what items we should get cheaper versions of to practice on first before upgrading to higher quality. Easier said than done.


Thinking things will last longer than they do

This one encompasses the previous three, but I think it’s worth its own special acknowledgment. I’ve been pretty proud of the fact that I drastically cut back on my spending on clothes once I started getting serious about budgeting. So much so that I don’t really even think about buying any new clothes most of the time. The truth of the matter is that I wear the same couple of pairs of jeans every week. Because of that…they are starting to get a little tattered and frayed, a few spots of spilled juice haven’t really washed out, and my style has matured a little making some of them less appropriate for me to keep wearing to work. Now that I realize I need some new clothes (with a little help from jokes from my friends), I also realize that I did not budget for replacing my wardrobe or really most things I own. I just kind of assumed they would last indefinitely once the initial purchase was made. Not realistic.


Paying avoidable fees

I picked up my first speeding ticket recently. It was completely avoidable, and was solely because I was annoyed at some traffic I had run into a few minutes earlier. That ticket cost me over $200 and could potentially increase my insurance premium for years. Other fees including bank fees, late fees on bills, and last minute shipping charges are also completely avoidable. A little planning and a little patience go a long way to saving money.

Most of these mistakes are from being young and inexperienced. So in the end all we can do is hope to make as few mistakes as possible, plan a little more in our budget than we think we’ll need, and then learn from the mistakes when we do unsurprisingly make them.


What is one or two avoidable mistakes you made/make as a young adult?


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34 thoughts on “5 Common Financial Mistakes Young Adults Make

  1. I think I am victim of not paying enough for items. I have replaced my salt grinder 3 times this year. That's absolutely ridiculous. I should just buy a Dudley and get over myself.

    I think the health one is important, but it's easier for us frugal Canadians to get looked after when we have problems. I can't even fathom those types of medical bills.

  2. Speeding tickets, talking on cell phone tickets, running red light tickets....I really shouldn't do that last one, when it's yellow, I shoudl slow down, I know.... but stupid tickets, I get them all the time because I"m always on the road between job sites. I waste SO MUCH MONEY with tickets and it really is avoidable 😳

  3. Anthony Thompson

    These financial mistakes are very common; especially for young adults. I had a good laugh after reading your first common financial mistake. When I bought my very first car many years ago, I thought that I had the calculations right. However, I realized later that I never factored in the cost of replacement tires, transmission fluid changes, and ad valorem taxes; and as result, my budgeting was greatly affected. Great post!

    1. Ryan @ LifeFreshOut

      Taxes have been a big one for me. I didn't realize that I would be paying a few hundred dollar more every year for my new car. Luckily I got my tax bill right around when I received my tax refund so I was able to take care of it. But man was I in a foul mood for a few days.

  4. The site link doesn't work? I saw myself in all of these. When I lived in DC with my first real job, I probably paid over $400 in parking tickets in one year. after that, I got fed up with myself and vowed on near-paranoia to avoid tickets. I've been in LA (the land of the most ticket-happy officers) for 2.5 years and have had zero tickets! Of course, my boyfriend got about 4 at $25-30 each. But he'd never lived in a big city before, so he got a pass for the first year 😀

  5. Guilty of the first mistake. Doesn't matter if it's cars, electronics, or anything else, those sales people are really good at "recommending" extra services, peripheral add-ons, extended warranties,etc... 😯

  6. Nice post Ryan and good points. I will check out your site. I remember as a young adult I severely under-estimated the costs of things. You don't realize it when your young, but so much marketing (i.e. the Mall, credit cards) is targeting at you because they know you'll make poor choices. In particular, I really think keeping up on your health is the best advice. Ask anyone who has ever suffered a true medical situation and they will tell you that your health is the greatest currency of all.

  7. What about the cost of not checking credit card statements each month? I found out, years into my relationship with a Bank of America card, that I was paying $89 PER MONTH for some sort of job-loss protection something or other.

  8. Nathalie

    This is such a good list of reminders for young adults and teens alike! I especially like the emphasis on PLANNING: think through your decisions and don't just focus on the cost of things TODAY but also their implications for the future. The example of the increased cost for the unusual size of tires is excellent. I think many of us think that because buying a car is such an expensive proposition there won't be any more costs after the initial buy! But planning and budgeting for the indispensible maintenance (don't forget to budget your regular oil changes - they can get quite costly if you buy a car larger than a small sedan but will save you money in car repairs if you are diligent about doing them!) is a MUST. I set aside a specific amount of money in my budget for car maintenance/repairs in the form of a "reserve" and I deduct my expenses from there as I go. So as long as I don't go over my "reserve", then there are no surprises. Yes, my banking account's available amount looks reduced on paper (well, I use Excel)because I'm pretending that I have already spent that money, but it helps me avoid the stress of figuring out how to pay for an unexpected repair and the temptation of putting it on credit.
    I think it comes with experience for a great part, but also the willingness to realize that older people DO know better in many instances and that you shouldn't be so quick to discount your parents' and other relatives' advice 🙂 I'm sending this post to my teens. Thanks Daisy and Ryan!

    1. Ryan @ LifeFreshOut

      I have a similar account that I put money in every month to offset maintenance costs. The funny part is that I still underestimate the cost of items even with that account. I once had to deal with an oil change that ended up costing over $100 because of some additional service that I hadn't planned on or realized was going to cost as much as it did when I said yes. Now that I'm a little older and a little wiser, I have an idea of how much that will cost and know when to just say no to the service manager. My parents have already saved me hundreds of dollars with simple pieces of advice. I consider older more experienced people invaluable resources. Hopefully you're teens will learn a few things and maybe even teach us some new tricks.

  9. That first example is huge. Go to the doctor! Don't wait until it's an emergency and you've got high hospital bills. Very, very true.

  10. Awesome post!!! I have made all of these mistakes when I started working with "real income" last year. It was really hard to find balance and I still struggle with it today, but he is so right... we must know how to stop ourselves from making these financial mistakes.

  11. You hit the nail on the head. When I was younger I did all of these things. I guess I just figured there wasn't another way. Now that I am older I have cleaned up my act a bit. The sooner you develop better habits the better you are long term though.

  12. This is great. It's one of those 'live and learn' posts about things that almost all of us inevitably do. I am slowly learning what is worth investing in...and what is not. I'm a weird girl...I only ever have a few pairs of shoes and as a result, I wear them out CONSTANTLY, having to buy new ones.

    1. Ryan @ LifeFreshOut

      I pretty much wear the same pair of shoes everyday, and so every year I have to buy a new pair. I like to think I'm saving money in some way, since I only buy shoes when I actually need them. When I was in college I bought $20 sneakers thinking I was saving money, but after replacing them for the third time in a single year, I realized that I was actually spending more money and decided to get some slightly more expensive, but infinitely better quality shoes. Now they actually last for a bit longer. But that's all part of gaining experience.

  13. Katie

    I can totally relate to you on the clothes thing. I hate spending money on clothes, but I just got a new job that I will have to buy nicer clothes for. Ughh!! And the car too, I wish I would have bought an older, less expensive car than what I bought on my own.

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  15. Kari@Small Budget Big Dreams

    I've probably been guilty of all of the above. I'd say that one of my biggest mistakes was thinking I could afford things I couldn't. I assumed if other people my age could afford things I could too. But they were going into debt to buy them and I was following their lead.

    1. Ryan @ LifeFreshOut

      A lot of people have more debt than you'd realize. Also everyone's situation is a little different. Some people might buy new clothes all the time, but eat ramen for dinner. Others might go on outrageous vacations every few months, but live in a shoebox. If you try to emulate each of the expensive parts of your friends' lives, it's easy to find yourself going into debt.

  16. I know of many friends that when buying their first car never took into account the cost of insurance. This can be a huge cost, sometimes being close to a monthly car payment depending on the car and the driver.

    I personally would buy the lowest priced item I could find. But then I learned that after buying the item and it falling apart and buying again that I ended up spending more than I would have had I just bought the higher priced, higher quality item. So now, I still shop around, but know when to pay more for things that will last.

    1. Ryan @ LifeFreshOut

      Insurance is a huge expense that's always hard to predict. A lot of places will quote you lower than your actual premium will be, leaving you in a tough spot when it comes time to sign up. Also, where you live can have a huge impact on how much you pay. I've found that increased insurance premiums can be a hidden cost of moving.

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  22. ashley

    I was uninsured for a long time but I found a great hospital only plan with empire blue that covers preventative care too. I've been really happy with it -- I even wrote a whole post about it on my blog since I was so relieved to not be throwing away money every month on overpriced health insurance.

  23. Keni

    Thanks so much for this post. I found myself suddenly interested in what mistakes I can make in the future, being only 19 and in the army has provided me with more money than I'm used to and this post opened my eyes on my recent "product wants" that aren't completely backed up with intelligent and logical reasons.

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