8 Small Financial Mistakes That Lead to a Mountain of Debt in Your 30s

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No one wants to deal with money problems when they get older. But, unfortunately, many high schools and colleges don’t teach teens and 20-somethings how to manage their finances properly.

In fact, the average person under 35 has around $5,800 in credit card debt alone, according to ValuePenguin*. That’s on top of student loan debt, living costs, and other expenses such as car payments or a mortgage.

And although you might think you’re careful with your money by doing things such as setting a budget, there are many smaller financial mistakes you could be making. We reached out to experts to find out some of the most common missteps made in your 20s that can lead to massive debt in your 30s, and how to avoid them.

1. Paying even one bill late

It can be easy to get caught up in life and miss the occasional bill payment. But that innocent act can put you on a bad path.

“Missing one payment on any bill can not only lead to interest charges, late fees, and debt, but to poor credit profiles and scores,” said Kevin Gallegos, vice president of Phoenix operations for Freedom Debt Relief. “To avoid, open all mail (paper and electronic) as soon as it arrives.”

An easy way to ensure you’re paying all your bills on time is to set up automatic payments. Most companies offer this as an option.

If you’re struggling to pay your bills, look to see where you can cut costs in your lifestyle. Or, if you’re burdened with debt from credit card bills and loans, check out debt consolidation companies and student loan refinancing options.

2. Not thinking about your credit score

A credit score is something that might never cross your mind until it’s time to take out a loan. But that’s when it’s too late. Having a low credit score or no score at all could mean you’re not eligible for the money you need to borrow or that you’ll get stuck with high interest rates you can’t afford.

That’s why it’s important to start building a credit history as soon as possible. “You can easily create a strong credit profile that will save you thousands on home and auto loans and insurance,” said Todd Huettner, president of Huettner Capital. “Start with one credit card and put something small on it each month like gas and pay it off each month.”

3. Signing up for subscription services

From movies to groceries, the internet has made it easy to get everything on demand. But that convenience comes at a cost.

“The biggest mistake I made in my 20s wasn’t big purchases but the little things that added up like subscription services,” said Catherine Agopcan, founder of personal finance website Sisters for Financial Independence. “Spending a few dollars a month on Netflix and other services was a huge hidden money drain.”

Not only should you consider your income and big budget items such as rent, but you should also look at charges you’re putting on your credit or debit card. Spending $10, $20, or $30 here and there can add up to hundreds every month. Cancel or stop spending money on anything that’s not essential.

4. Not contributing to a 401(k)

You might think that retirement is something that’s way too far off to worry about. Incredibly, 69% of millennials aren’t saving for retirement, according to a 2017 survey by Earnest.

“One of the single biggest financial mistakes people make especially in their 20s is not contributing to their company 401(k) plan,” said Scott Salaske, investing expert at Firstmetric.

You have the option to contribute to a Roth or traditional 401(k) on your own, but you can up the ante on your contributions if your employer has a matching program. “Sometimes companies match dollar for dollar on a certain percentage of contributions,” added Salaske. That means if you put $100 into your retirement, your company could match a percentage of that.

While this financial mistake won’t put you into debt, you could miss out on free money.

5. Carrying a credit card balance

Credit card debt is a slippery slope. Carrying a balance means you’ll have to pay interest on your debt.

“I was carrying some debt on my credit cards, in addition to taking out student loans,” said smart shopping expert Trae Bodge. “My credit score plummeted. To avoid this, a good habit for people in their 20s is to pay off their credit cards in full every month. If you can’t do it, it means that you are overspending.”

To help you avoid credit card debt, try using Dave Ramsey’s envelope system. With this system, you split your cash between envelopes that are assigned to different expenses, such as gas, groceries, and entertainment. Once the money in an envelope runs out, you can’t spend any more on that expense for the rest of the month.

6. Not having an emergency fund

As a naive 20-year-old, it’s easy to overlook the need for an emergency fund. But that money could save you from going into debt when you have an unexpected expense.

“Most people forget about the unforeseeable costs like breaking a bone or needing to replace a piece of furniture,” said Doug Keller of Peak Personal Finance. “Without an emergency fund, you’re forced to rely on things like credit cards and loans. That’s dangerous.”

You should aim to have three to six months’ worth of expenses in an emergency fund at any given time. This chunk of money could get you through an unexpected financial hurdle.

7. Refusing to talk finances in your relationship

When you’re in your 20s, talking about money with your significant other might not be fun or sexy, but it’s necessary.

“One of the most common financial mistakes is avoiding the money talk with your partner,” said Sam Schultz, co-founder of Honeyfi, a free app that helps couples manage money. “But by regularly talking to your partner about money, you give each other a sounding board for important financial decisions and a support system to help you stay on track.”

In fact, Honeyfi recently conducted a survey of 500 millennial couples. It found that couples who discuss their finances regularly are over 50% more likely to say they’re “extremely happy” in their relationship. Further, they’re 14% less likely to argue about money each month and 37% more likely to say they have a “great” sex life.

8. Not reevaluating your student loans

Student loan debt is an epidemic. Millions of people are bogged down with payments well into their 30s, which is why you should consider refinancing.

“Refinancing your student loans provides the best opportunity to pay them off more quickly and cost-efficiently,” said Carla Dearing, CEO of Sum180, an online financial wellness service. “Refinancing provides you with a single loan with a single monthly payment and a lower interest rate. The lower interest rate means more of each payment is going toward repayment of the balance owed.”

If you decide to take this path, be sure to shop around to get rates from different lenders. It’s smart to compare interest rates to see if you can lower yours. Just remember: While extending your repayment term lowers your payments, you’ll end up paying more in interest over time. Also, refinancing a federal loan into a private one means you’ll miss out on federal protections, such as forbearance.

Don’t let small mistakes ruin your future

You could have the best intentions to save your money and budget properly. But you could still fall for common money traps. Those small mistakes could lead to big consequences later on, so it’s best to take inventory of your financial situation every now and then. Seeing where you’re falling short and excelling is key to ensuring a prosperous future.

*ValuePenguin is an affiliate of LendingTree, Student Loan Hero’s parent company.

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2 Important Disclosures for College Ave.

CollegeAve Disclosures

College Ave Student Loans products are made available through either Firstrust Bank, member FDIC or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.

(1)All rates shown include the auto-pay discount.  The 0.25% auto-pay interest rate reduction applies as long as a valid bank account is designated for required monthly payments. Variable rates may increase after consummation.

(2)This informational repayment example uses typical loan terms for a freshman borrower who selects the Deferred Repayment Option with a 10-year repayment term, has a $10,000 loan that is disbursed in one disbursement and a 8.35% fixed Annual Percentage Rate (“APR”): 120 monthly payments of $179.18 while in the repayment period, for a total amount of payments of $21,501.54. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary.

(3)As certified by your school and less any other financial aid you might receive. Minimum $1,000.

Information advertised valid as of 11/4/2019. Variable interest rates may increase after consummation.


3 Important Disclosures for Discover.

Discover Disclosures

  1. Students who get at least a 3.0 GPA (or equivalent) qualify for a one-time cash reward on each new Discover undergraduate and graduate student loan. Reward redemption period is limited. Please visit DiscoverStudentLoans.com/Reward for any applicable reward terms and conditions.
  2. View Auto Reward Debit Reward Terms and Conditions at DiscoverStudentLoans.com/AutoDebitReward.
  3. Aggregate loan limits apply.
  4. Lowest rates shown are for the undergraduate loan and include an interest-only repayment discount and a 0.25% interest rate reduction while enrolled in automatic payments. The interest rate ranges represent the lowest interest rate offered on the Discover Undergraduate Loan and highest interest rates offered on Discover student loans, including Undergraduate, Graduate, Health Professions, Law and MBA Loans. The fixed interest rate is set at the time of application and does not change during the life of the loan. The variable interest rate is calculated based on the 3-Month LIBOR index plus the applicable Margin percentage. The margin is based on your credit evaluation at the time of application and does not change. For variable interest rate loans, the 3-Month LIBOR is 2.00% as of January 1, 2020. Discover Student Loans will adjust the rate quarterly on each January 1, April 1, July 1 and October 1 (the “interest rate change date”), based on the 3-Month LIBOR Index, published in the Money Rates section of the Wall Street Journal 15 days prior to the interest rate change date, rounded up to the nearest one-eighth of one percent (0.125% or 0.00125). This may cause the monthly payments to increase, the number of payments to increase or both. Please visit discover.com/student-loans/interest-rates for more information about interest rates.
Discover's lowest rates shown are for the undergraduate loan and include an interest-only repayment discount and a 0.25% interest rate reduction while enrolled in automatic payments.

4 Important Disclosures for CommonBond.

CommonBond Disclosures

Offered terms are subject to change and state law restrictions. Loans are offered through CommonBond Lending, LLC (NMLS #1175900).

  1.  Rates are as of July 1, 2019 and include auto-pay discount. All loans are eligible for a 0.25% reduction in interest rate by agreeing to automatic payment withdrawals once in repayment. Variable rates may increase after consummation.

5 Important Disclosures for Ascent.

Ascent Disclosures

Before taking out private student loans, you should explore and compare all financial aid alternatives, including grants, scholarships, and federal student loans and consider your future monthly payments and income. Applying with a cosigner may improve your chance of getting approved and could help you qualify for a lower interest rate. Ascent Student Loans may be funded by Richland State Bank (RSB). Ascent Student Loan products are subject to credit qualification, completion of a loan application, verification of application information and certification of loan amount by a participating school. Loan products may not be available in certain jurisdictions, and certain restrictions, limitations; and terms and conditions may apply. Ascent is a federally registered trademark of Turnstile Capital Management (TCM) and may be used by RSB under limited license. Richland State Bank is a federally registered service mark of Richland State Bank.

  1. Variable rate loans are based on a margin between 1.90% and 13.50% plus the 1-Month London Interbank Offered Rate (LIBOR) rounded to the nearest 1/100th of a percent. The current LIBOR is 1.629%, which may adjust monthly. Your interest rate may increase or decrease, based on LIBOR monthly changes, resulting in an Annual Percentage (APR) range between 3.14% and 11.88%. Fixed rate loans have an APR range between 4.09% and 13.03% based on your credit worthiness and your selected program. Competitive variable rates calculated monthly at the time of loan approval. Rates are effective as of 03/01/2020 and reflect an Automatic Payment Discount of 0.25% on the lowest offered rate and a 2.00% discount on the highest offered rate. Automatic Payment Discount is available if the borrower is enrolled in automatic payments from their personal checking account and the amount is successfully withdrawn from the authorized bank account each month. (See Automatic Payment Discount Terms & Conditions.)
  2. Payments may be deferred. Subject to lender discretion, forbearance and/or deferment options may be available for borrowers who are encountering financial distress.
  3. Making interest only or partial interest payments while in school will not reduce the principal balance of the loan. There are three (3) flexible in-school repayment options that include fully deferred, interest only and $25 minimum repayment.
  4. Flexible repayment plans may be offered up to a fifteen (15) year repayment term for a variable rate loan and ten (10) year repayment term for a fixed rate loan. Students must be enrolled at least half-time at an eligible school. Minimum loan amount is $2,000.
  5. Interest rate reduction of 0.25% for enrollment in automatic debit applies only when the borrower and/or cosigner signs up for automatic payments and the regularly scheduled, current amount due (including full, flat, or interest only payments, as applicable) is successfully deducted from the designated bank account each month. Interest rate reduction(s) will not apply during periods when no payment is due, including periods of In-School, Deferment, Grace or Forbearance. If you have two (2) returned payments for Nonsufficient Funds, we may cancel your automatic debit enrollment and you will lose the 0.25% interest rate reduction. You will then need to re-qualify and re-enroll in automatic debit payments to receive the 0.25% interest rate reduction.
  6. All applicants (individual and cosigner) are required to complete a brief online financial literacy course as part of the application process to be eligible for funding.
  7. Eligibility, loan amount and other loan terms are dependent on several factors, which may include: loan product, other financial aid, creditworthiness, school, program, graduation date, major, cost of attendance and other factors. Aggregate loan limits may apply. The cost of attendance is determined and certified by the educational institution.
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  9. 1% Cash Back Graduation Reward subject to terms and conditions. Click here for details. In order to be eligible for the 1% Cash Back Graduation Reward, borrower must meet the following criteria after graduation:
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    • The student borrower may change majors and/or transfer to a different school, but must obtain the same level of degree (e.g. – undergraduate or graduate)
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  10. Students can apply to release their cosigner and continue with the loan in only their name after making the first 24 consecutive regularly scheduled full principal and interest payments on-time and meeting the other eligibility criteria to qualify for the loan without a cosigner.

* Application times vary depending on the applicant’s ability to supply the necessary information for submission.


5 Important Disclosures for Citizens.

Citizens Disclosures

Undergraduate Rate Disclosure: Variable rate, based on the one-month London Interbank Offered Rate (“LIBOR”) published in The Wall Street Journal on the twenty-fifth day, or the next business day, of the preceding calendar month. As March 1, 2020, the one-month LIBOR rate is 1.62%. Variable interest rates range from 2.72% – 10.98% (2.72% – 10.83% APR)  and will fluctuate over the term of the loan with changes in the LIBOR rate, and will vary based on applicable terms, level of degree earned and presence of a co-signer. Fixed interest rates range from 4.72% – 12.19% (4.72% – 12.04% APR)  based on applicable terms, level of degree earned and presence of a co-signer. Lowest rates shown requires application with a co-signer, are for eligible applicants, require a 5-year repayment term, borrower making scheduled payments while in school and include our Loyalty and Automatic Payment discounts of 0.25 percentage points each, as outlined in the Loyalty Discount and Automatic Payment Discount disclosures. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change. Please note: Due to federal regulations, Citizens One is required to provide every potential borrower with disclosure information before they apply for a private student loan. The borrower will be presented with an Application Disclosure and an Approval Disclosure within the application process before they accept the terms and conditions of the loan.

Federal Loan vs. Private Loan Benefits: Some federal student loans include unique benefits that the borrower may not receive with a private student loan, some of which we do not offer with the Education Refinance Loan. Borrowers should carefully review their current benefits, especially if they work in public service, are in the military, are currently on or considering income based repayment options or are concerned about a steady source of future income and would want to lower their payments at some time in the future. When the borrower refinances, they waive any current and potential future benefits of their federal loans and replace those with the benefits of the Education Refinance Loan. For more information about federal student loan benefits and federal loan consolidation, visit http://studentaid.ed.gov/. We also have several resources available to help the borrower make a decision at http://www.citizensone.com/EdRefinance, including Should I Refinance My Student Loans? and our FAQs. Should I Refinance My Student Loans? includes a comparison of federal and private student loan benefits that we encourage the borrower to review. 

Citizens One Student Loan Eligibility: Borrowers must be enrolled at least half-time in a degree-granting program at an eligible institution. Borrowers must be a U.S. citizen or permanent resident or an international borrower/eligible non-citizen with a creditworthy U.S. citizen or permanent resident co-signer. For borrowers who have not attained the age of majority in their state of residence, a co-signer is required. Citizens One reserves the right to modify eligibility criteria at anytime. Interest rate ranges subject to change. Citizens One Student Loans private student loans are subject to credit qualification, completion of a loan application/consumer credit agreement, verification of application information, and if applicable, self-certification form, school certification of the loan amount, and student’s enrollment at a Citizens One Student Loans-participating school. 

Please Note: International Students are not eligible for the multi-year approval feature.

Loyalty Discount Disclosure: The borrower will be eligible for a 0.25 percentage point interest rate reduction on their loan if the borrower or their co-signer (if applicable) has a qualifying account in existence with us at the time the borrower and their co-signer (if applicable) have submitted a completed application authorizing us to review their credit request for the loan. The following are qualifying accounts: any checking account, savings account, money market account, certificate of deposit, automobile loan, home equity loan, home equity line of credit, mortgage, credit card account, or other student loans owned by Citizens Bank, N.A. Please note, our checking and savings account options are only available in the following states: CT, DE, MA, MI, NH, NJ, NY, OH, PA, RI, and VT and some products may have an associated cost. This discount will be reflected in the interest rate disclosed in the Loan Approval Disclosure that will be provided to the borrower once the loan is approved. Limit of one Loyalty Discount per loan and discount will not be applied to prior loans. The Loyalty Discount will remain in effect for the life of the loan. 

Automatic Payment Discount Disclosure: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their student loans owned by Citizens Bank, N.A. during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. Discount is not available when payments are not due, such as during forbearance. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account three or more times within any 12-month period, the borrower will no longer be eligible for this discount.

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Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print to help you understand what you are buying. Be sure to consult with a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time.