7 Things Twentysomethings Should Never Do With Their Money

Being lazy with your internet bill might be costing you.

Young woman looking at bills on couch

Saving more money is up there with "start eating salad" on everyone's New Year's resolution list. According to a Nielsen study, a quarter of Americans say it's a priority for them in the new year. But just like that whole eating-healthy thing, you might think about starting a budget, but never follow through.

That juice cleanse can wait. When it comes to your money, though, it's crucial to start really saving money and budgeting, especially right now. Twentysomethings are the most educated generation in American history, according to the Pew Research Center. But they're also the first generation in modern times to be worse off financially than their parents and their grandparents were at their age. Because of the recession, young people have to work way harder to get their finances in order early so they have enough to retire on later in life.

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Despite the data, don't get intimidated. Because you're starting young, making a few small financial changes can have a major impact on your future finances. Here are seven mistakes that you can avoid in the new year to save your wallet from some serious stress.

1. Don't splurge as soon as you get your hands on cash. Ever wonder why you always want to blow your tax return on shoes? According to a study from MIT, it's all in your brain. When you suddenly get more money, the reward centers in your brain light up and make you feel invincible. It's the same brain system that gets activated by food and cocaine. And just like a chemical high, your financial high comes crashing down once you've spent too much money on stupid stuff. "What makes people happier is not actually splurges," says Teresa Ghilarducci, professor of economics at the New School for Social Research in New York. "What makes people happier is steady increases in living standards and control over their money." So instead of seeking the temporary high of a designer handbag, save or invest the money so you can eventually move out of your tiny apartment. It might not feel awesome now, but it will later.

2. Don't finance anything you don't absolutely need. Sometimes, like when you're buying a car, financing — taking out a line of credit with a company and paying your bill in monthly installments — is unavoidable. Most of us can't fork over the entire price of the vehicle in one sitting, after all. But way more places offer financing on stuff that's not essential, from fancy furniture to high-priced electronics. It's tempting to pay zero money down on an HDTV, but if you give in, you'll be stuck with a lot of legalese about interest and it'll hit your wallet in the long term. "The second you leave the store, a couch starts losing value," says Stefanie O'Connell, author of The Broke and Beautiful Life. "You pay more, but the value goes less. It's not worth going into debt." Instead, opt for lower-price retailers like IKEA or check Craigslist for deals on used products.

3. Don't get lazy about automatic payments. Sure, you may have already cut the cord and are saving money on cable. But do you really, truly need to pay for Netflix, Hulu, Amazon Prime, and a dozen other subscription services? Take a good look at your transactions every month online and analyze which of them you really use. "Unless you're really looking with a fine-tooth comb, you may not miss it, and these businesses are making a ton off that," says Mary Ann Monforte, assistant professor of accounting practice at Syracuse University.

4. Don't lease a car — or buy a new one. Cars are rarely seen as good investments. They depreciate the minute you drive them off the lot, after all. But if you plan on putting a lot of miles on your car, your best bet is to buy a used model. Yes, it's not going to be as flashy, but you own the thing once you've finished all your payments, or if you're in a position where you can buy it in full up front. Once you've fully paid for the car, you can drive it for years and years, sell it, or trade it in, O'Connell notes. If you lease a car, you may end up with a nicer model, but you're stuck with lots of fine print regulating things like mileage and wear and tear, and sometimes have to pay higher insurance premiums, Monforte says. And then you have to turn it in after a few years with nothing to show for it. It's like renting a fancy apartment when you could afford to buy a perfectly good one. Sure, the fanciness might seem nice, but it might be smarter to work towards something you can own.

5. Don't assume you're getting the best deal on utilities. Sitting on hold with your cable company should be its own circle of hell. But all that stress might be worth its weight in cold, hard cash. Monforte says that your phone, cable, and internet providers often run promotions but don't bother to tell you about them. So every few months, Google "(Your Provider Here)+deals" and see if anything is available. Then give them a call, and asked to be switched to the promo deal. If they say no, just hint that they might lose you as a customer and you need their help to stick around. You might just save some money.

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6. Don't miss out on easy tax deductions. Your twenties are a time of lots of change — but all those life events might save you money on your taxes. Lisa Greene-Lewis, a CPA and tax expert for TurboTax, says that the following could all be tax deductible: moving for a job, donating clothes to charity, and even starting a company. If you're renting out a room on Airbnb, or using your personal car as an Uber or Lyft driver, expenses associated with those activities might be deductible too. The IRS's website has a ton of tax credits and deductions you might be eligible for, from driving an electric car to taking college courses. Before you file this year, make sure you're getting what's yours.

7. Don't give into pressure from friends to spend more. Are all your friends scheduling catch-up drinks now that the holiday is over? You don't have to go to five different cocktail bars in one week. That's what got you in trouble last year, right? "In January, people are taking a look back at December and realizing how many happy hours and holiday parties there were, and having what we call the holiday financial hangover," says Holly Perez, consumer money expert for Mint.com. To make up for your holiday expenses, have friends over for boxed wine and Netflix instead. It's cheaper, and you don't even have to change out of your sweatpants.

Follow Megan on Twitter.

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