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.

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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1 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.

Rates shown are for the College Ave Undergraduate Loan product and include autopay 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.
 
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. This informational repayment example uses typical loan terms for a first year graduate student 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 7.10% fixed Annual Percentage Rate (“APR”): 120 monthly payments of $141.66 while in the repayment period, for a total amount of payments of $16,699.21. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary.

Information advertised valid as of 7/22/2021. Variable interest rates may increase after consummation. Approved interest rate will depend on the creditworthiness of the applicant(s), lowest advertised rates only available to the most creditworthy applicants and require selection of full principal and interest payments with the shortest available loan term.


2 Sallie Mae Disclaimer: Click here for important information. Terms, conditions and limitations apply.

3 Important Disclosures for CommonBond.

CommonBond Disclosures

Offered terms are subject to change and state law restriction. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900), NMLS Consumer Access. If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown.  If you choose to complete an application, we will conduct a hard credit pull, which may affect your credit score. All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 0.15% effective Jan 1, 2021 and may increase after consummation.


4 Important Disclosures for EdvestinU.

EdvestinU Disclosures

EDvestinU is a product of the nonprofit New Hampshire Higher Education Loan Corporation (dba The NHHEAF Network) NMLS ID#1527348.

APR range and repayment rates displayed assume a $10,000 loan disbursed in two equal disbursements. APR low assumes immediate repayment and 7 year repayment. APR high assumes deferred repayment and 15 year repayment. APR’s presented include a .50% interest rate reduction for electing to have payments automatically deducted from a bank account. The interest rate reduction for authorizing our servicer to automatically deduct monthly payments from a savings or checking account will not reduce the monthly payment, but will reduce the monthly finance charge, resulting in a lower total cost of loan. All examples are provided for educational purposes and actual terms may vary based on credit history, loan amount, applicable repayment term, and chosen repayment plan and method. Please note that the interest rate on variable rate programs may increase or decrease over time. The variable rate example assumes the same standard rate for the life of the loan. The NHHEAF Network reserves the right to modify or cancel its program at any time.  

Eligibility: Dependent and independent U.S. citizen students. Currently residents of Washington and California are not eligible for EDvestinU programs.
Students must be enrolled at least half-time at a U.S.-based Title IV, degree-granting college or university.
The borrower or cosigner (if applicable) must have a minimum adjusted gross income of $30,000.

Loan Limits: Minimum loan amount of $1,000.
Maximum loan amount is cost of education less aid received.

Repayment: Standard or graduated repayment options available during repayment; 7, 10, or 15 year term selected by the borrower.
6-month grace period available to borrowers electing a full in-school deferment. 
No prepayment penalty.
Payments may be postponed during repayment by qualifying for an economic hardship deferment.

Cosigner Release: Cosigner release allowed if an account is in current standing, after 36 months of consecutive & on-time payments with a borrower FICO >749 for EDvestinU Private Student Loans and minimum income requirement of $30,000 with no foreclosures, repossessions, wage garnishments, unpaid tax liens, unpaid judgments or other public records having an open balance exceeding $100 during the last 7 years. The borrower must not currently be involved in bankruptcy proceeding or had any bankruptcy filings during the past 10 years and cannot have any defaults on education loans.


5 Important Disclosures for Earnest.

Earnest Disclosures

  1. Rates include 0.25% Auto Pay Discount
     
  2. Explanation of Rates “With Autopay” (APD)
    Rates shown include 0.25% APR discount when client agrees to make monthly principal and interest payments by automatic electronic payment. Use of autopay is not required to receive an Earnest loan.

    Available Terms
    For Cosigned loans – 5, 7, 10, 12, 15 years. 
    Primary Only – 10, 12, 15 years

    In school deferred payment is not available in AL, AZ, CA, FL, MA, MD, MI, ND, NY, PA, and WA).


6 Important Disclosures for Ascent Student Loans.

Ascent Student Loans Disclosures

Ascent loans are funded by Bank of Lake Mills, Member FDIC. Loan products may not be available in certain jurisdictions. Certain restrictions, limitations; and terms and conditions may apply. For Ascent Terms and Conditions please visit: >AscentFunding.com/Ts&Cs;.

Rates are effective as of 07/01/2021 and reflect an automatic payment discount of either 0.25% (for credit-based loans) OR 1.00% (for undergraduate outcomes income-based loans). 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. For Ascent rates and repayment examples please visit: >AscentFunding.com/Rates.

1% Cash Back Graduation Reward subject to terms and conditions, please visit AscentFunding.com/Cashback. Cosigned Credit-Based Loan student borrowers must meet certain minimum credit criteria. The minimum score required is subject to change and may depend on the credit score of your cosigner. Lowest APRs are available for the most creditworthy applicants and may require a cosigner.


7 Important Disclosures for Funding U.

FundingU Disclosures

Offered terms are subject to change. Loans are made by Funding University which is a for-profit enterprise. Funding University is not affiliated with the school you are attending or any other learning institution. None of the information contained in Funding University’s website constitutes a recommendation, solicitation or offer by Funding University or its affiliates to buy or sell any securities or other financial instruments or other assets or provide any investment advice or service.


8 Important Disclosures for SoFi.

sofiDisclosures

UNDERGRADUATE LOANS: Fixed rates from 4.13% to 10.66% annual percentage rate (“APR”) (with autopay), variable rates from 1.12% to 11.23% APR (with autopay). GRADUATE LOANS: Fixed rates from 4.13% to 10.90% APR (with autopay), variable rates from 1.10% to 11.34% APR (with autopay). MBA AND LAW SCHOOL LOANS: Fixed rates from 4.08% to 10.86% APR (with autopay), variable rates from 1.05% to 11.29% APR (with autopay). PARENT LOANS: Fixed rates from 4.23% to 10.66% APR (with autopay), variable rates from 1.20% to 11.23% APR (with autopay). For variable rate loans, the variable interest rate is derived from the one-month LIBOR rate plus a margin and your APR may increase after origination if the LIBOR increases. Changes in the one-month LIBOR rate may cause your monthly payment to increase or decrease. Interest rates for variable rate loans are capped at 13.95%, unless required to be lower to comply with applicable law. Lowest rates are reserved for the most creditworthy borrowers. If approved for a loan, the interest rate offered will depend on your creditworthiness, the repayment option you select, the term and amount of the loan and other factors, and will be within the ranges of rates listed above. The SoFi 0.25% autopay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. Information current as of 4/1/2021. Enrolling in autopay is not required to receive a loan from SoFi. SoFi Lending Corp., licensed by the Department of Business Oversight under the California Financing Law License No. 6054612. NMLS #1121636 (>www.nmlsconsumeraccess.org).


9 Important Disclosures for Citizens Bank.

Citizens Bank Disclosures

Undergraduate Rate Disclosure: Variable interest rates range from 1.15% – 11.01% (1.15% – 10.24 APR)Fixed interest rates range from 4.18% – 11.70% (4.18% – 10.83% APR).

Graduate Rate Disclosure: Variable interest rates range from 1.89% – 10.66% (1.89% – 10.41% APR). Fixed interest rates range from 4.64% – 11.23%% (4.64% – 10.95% APR).

Business/Law Rate Disclosure: Variable interest rates range from 1.89% – 9.22% (1.89% – 8.50% APR). Fixed interest rates range from 4.38% – 10.44% (4.38% – 9.72% APR).

Medical/Dental Rate Disclosure: Variable interest rates range from 1.89% – 8.02% (1.89% – 7.72% APR). Fixed interest rates range from 4.28% – 9.24% (4.28% – 8.94% APR).

Parent Loan Rate Disclosure: Variable interest rates range from 1.97% – 7.06% (1.97% – 7.06% APR). Fixed interest rates range from 4.94% – 8.58% (4.94% – 8.58% APR).

Bar Study Rate Disclosure: Variable interest rates range from 4.44% – 9.58% (4.44% – 9.52% APR). Fixed interest rates range from 7.39% – 12.94% (7.40% – 12.83% APR).

Medical Residency Rate Disclosure: Variable interest rates range from 3.53% – 7.03% (3.53% – 6.76% APR). Fixed interest rates range from 6.99% – 10.49% (6.98% – 10.09% APR).

Variable Rate Disclosure: Variable Rates are 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 of June 1, 2021, the one-month LIBOR rate is 0.09%. Variable interest rates will fluctuate over the term of the loan with changes in the LIBOR rate, and will vary based on applicable terms, level of degree and presence of a co-signer. The maximum variable rate is the greater of 21.00% or Prime Rate plus 9.00%. 

Fixed Rate Disclosure: Fixed rate ranges are based on applicable terms, level of degree, and presence of a co-signer.

Lowest Rate Disclosure: Lowest rates require a 5-year repayment term, immediate repayment, a graduate degree (where applicable), 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. Rates are subject to additional terms and conditions, and are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.

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.  Borrowers should carefully review federal benefits, especially if they work in public service, are in the military, are considering possible loan forgiveness options, 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. 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 on our website 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.

Eligibility Criteria: Applicants must be a U.S. citizen, permanent resident, or eligible non-citizen with a creditworthy U.S. citizen or permanent resident co-signer. For applicants who have not attained the age of majority in their state of residence, a co-signer is required. Citizens Bank reserves the right to modify eligibility criteria at any time. Citizens Bank private student loans are subject to credit qualification, completion of a loan application/Promissory Note, verification of application information, and if applicable, self-certification form, school certification of the loan amount, and student’s enrollment at a Citizens Bank participating school.

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.