If someone had told me at 22 years old that it would take an entire decade before I would earn enough to pay off my student loans, I think I would have curled up into a ball and cried. I graduated from college in 2009, at the height of the Great Recession. My first job out of college was made possible due to an Obama-era grant issued to a well-known public health research arm. It took me nine months after graduation to secure the job, and I felt fortunate to earn a paycheck, but I thought the role would be temporary.
I fully expected to be earning a higher salary and paying off my student loans within a year. That didn’t happen. I stayed at that job for three years and barely made a dent in my debt. That first job and some of my youthful indiscretions ultimately kept me broke. I hadn’t yet developed good financial habits, and I dove into adult life more or less blind. But somewhere along the way, I was able to identify my weaknesses and course-correct before any lasting damage was done.
Still, I wish someone had sat me down 13 years ago and shared some of this advice with me. When you know better, you do better. I definitely learned that the hard way, and after a decade of mistakes, these lessons have finally stuck with me. Here are four habits that kept me broke in my 20s.
Not setting long-term financial goals
This was the single biggest factor that kept me broke in my 20s. Sure, I understood the importance of “investing for the future.” But when I graduated, the stock market was terrifying and even homeownership didn’t have the same appeal as it does now. Retirement? That seemed too far off to even think about. Even once I started earning a higher salary, I didn’t think about ways I could put my money to work for me. I didn’t save up for a house. I didn’t set aside six months of living expenses. I didn’t build a rainy-day fund. I was in survival mode and didn’t think beyond the present.
Yes, I made some reckless spending decisions that came from not setting a budget. What kept me broke was my failure to set long-term financial goals. This lack of planning led me to cash out my 401K after leaving a job. I lost out on thousands of dollars because those investments would have grown substantially over the past decade — not to mention the tax penalties I incurred.
I still shudder when I think about the long-term growth I gave up for short-term gains. Not setting goals hurt me in the long run, but it also kept me broke in the short term because I didn’t prioritize saving. As a result, I made poor financial decisions and spent too much of my income on nonessential purchases that helped me cope with the stress I was experiencing.
They say you can’t buy happiness, but in my 20s, I sure tried. It’s no secret that spending money triggers the release of dopamine. That’s why I ate out three meals a day and rewarded myself with conspicuous purchases when I wasn’t happy. I upgraded my laptop every year, went on late-night online shopping sprees and regularly ordered overpriced “treats” from Goldbelly. At the time, I saw this as a reward for burning myself out at work. Being able to break up an unpleasant workday with coffee breaks and delicious meals was how I got through it.
Years later, investing provides me the same thrill but is a much healthier outlet for my income. If I had invested in those companies’ stocks instead of their merchandise, I would have a much larger nest egg today. Hindsight is 20-20, but I’ve made an effort in my 30s to be smart with my money and recognize ways to spend it that are both satisfying and rewarding in the long run. I credit the FIRE (Financial Independence Retire Early) community for providing abundant resources (not to mention enthusiasm) that taught me how to invest. I taught myself how to research stocks through reading articles and social media and speaking with experts.
Not knowing how to cook
As I mentioned, in my 20s, I dined out for virtually every meal. It seems obvious now, but not knowing how to cook contributed significantly to my financial woes. Spending over $30 per day on food and coffee adds up to over $18,000 per year. With that sum, I could have paid off most of my student loans and been on a better path toward financial prosperity. Not to mention how much that money would have grown by now if I had invested it.
I justified these expenses as necessary for dealing with an unhappy work environment. If I was going to work at a job where I was underpaid and overworked, I wanted to reap some benefit from it. Multiple coffee breaks and dining out for every meal felt like little rewards that made it all worthwhile.
In my 30s, I finally learned to cook. When the pandemic hit and everything shut down, all of a sudden, it was on me to prepare my own meals. But it wasn’t just more economical — it was also therapeutic (not to mention healthier). When I was younger, I saw cooking as a waste of time. It was much more convenient to pick up food and then spend my time doing something productive, even after work. Now I understand that preparing food for myself is a reward, a form of self-care. The act of cooking a meal is relaxing and a nice change from all the mentally draining activities I do at work. What I spend on food has dropped significantly, and I’m physically, mentally and financially better off for it.
Not investing in my physical health
This goes back to the importance of investing in both your well-being and your financial portfolio. In my 20s, I didn’t join a gym or prioritize my physical health. My justification was that I couldn’t afford a gym membership or have time to go consistently. I was broke and burned out — too exhausted for a workout.
Today, I prioritize my health above all else because it sets the tone for everything else in my life. I have an unlimited pass at a Pilates studio that isn’t cheap but still a worthwhile investment. Meeting my daily fitness goal during my toughest days provides a sense of accomplishment and momentum to tackle other tasks. If I had made this investment in my physical health in my 20s, I know I would have been in a much better space to tackle all my career and financial struggles. It would have been well worth it to skip my daily coffee break and allocate that money (and time) towards the gym.
In my 20s, I had a fear of everything. Fear of failure. Fear of being unable to find another job. Fear of having no way to pay my bills. Most adults advised me to wait until I found another job before quitting. It made sense: Employers don’t like gaps on your resume, and by staying put, I still had a steady income.
But that first job out of college sucked up all my energy, so I felt too defeated to give my job search the attention it deserved. I was sending out resumes with either poorly written cover letters or none at all. I was applying for low-level positions because the toxicity I experienced at work made me think I wasn’t good enough to aim higher.
Ultimately, I put in my two-week notice after a bathroom crying session at work and didn’t look back. I figured, if nothing else, I’d wait tables or work at a retail store. My gamble paid off. Within two weeks of leaving, I got my dream job. It paid about 50% more and gave me immeasurable confidence and opportunities for growth.
You can’t reap big rewards without taking significant risks. When I stopped making decisions based on fear, I began to thrive. I’ve also realized that when you cut the negative out of your life, you make room for something positive to grow in its place. In my case, it positively impacted my career and finances.
The bottom line
I would love to say that I learned my lesson then and never repeated these mistakes, but I didn’t. It often takes several missteps before these lessons hit home and we develop better habits. Over my decade-long career, there have been several times when I didn’t ask for a raise or didn’t negotiate a higher salary out of fear: I didn’t want to appear greedy or ungrateful for the opportunities I’d been given.
It took time, but I eventually learned not to make fear-based decisions and advocate for myself. I became conscious of my poor financial choices and learned to form better habits. The financial mistakes I made in my 20s had negative consequences, but I’ve managed to recover. It’s never too late to start.