4 Bad Spending Habits to Avoid in Your 20s

Starting off on the wrong foot financially when you're in your 20s can haunt you for decades to come.

The millennial generation has witnessed firsthand the fallout caused by bad money choices and it's substantially shaped the way they approach things like spending and debt.

Despite being aware of the need to start saving for the future as early as possible, 20-somethings are still stumbling when it comes to building their nest egg.

For millennials who are trying to get a jump start on retirement, here are the four worst spending habits to avoid.

1. Splurging on experiences

When it comes to how they spend their money, the latest generation of young adults puts a heavy emphasis on creating lasting memories versus surrounding themselves with stuff.

Research shows that the overwhelming majority of 18- to 34-year-olds would rather fork over their hard-earned cash to pay for real-life experiences than material goods.

That desire to live in the moment that's shared by so many 20-somethings can come at a high cost in terms of how it affects their retirement savings.

For instance, let's say you landed a job making $40,000 a year.

You chip in 3 percent to your 401(k) and your employer matches half of every dollar you put in.

If you start contributing at age 25 and keep putting in the same amount until you turn 65, your account would be worth roughly $527,000.

Now, assume you double up your contributions to 6 percent. Once you're ready to retire, you'd have over $1 million in your 401(k).

When you run the numbers, it's a big incentive to cut back on some of your experience-driven spending.

Skipping out on pricey outings in favor of low-cost or free entertainment every once in awhile is a really easy way to find the extra money you need to save without missing out on any fun.

For instance, instead of going out to dinner with friends, you could try hosting a regular potluck night each week or a Sunday brunch buffet.

The money you would have spent can get funneled into your savings account instead.

2. Shelling out big bucks for luxury travel

There's nothing like traveling in style and that's a philosophy many 20-somethings seem to agree with.

A survey from Chase Card Services found that millennials are more willing to spend money on luxury upgrades and services like dry cleaning and massage or spa services.

They're also more likely to prefer Elite status as a primary benefit of a travel rewards credit card program and extend a business trip to take a personal vacation.

If you like to get out and see the sights, there are ways you can do it without having to shortchange your retirement or take your comfort level down a notch.

Charging all of your travel expenses to a rewards credit card that pays you miles or points that can be used for hotel stays or flights can help you to get where you're going for less.

That's an especially good option for millennials who travel regularly for work and get reimbursed for their expenses.

Here are the top online banks that have highest savings accounts rates and free interest checking accounts:

3. Carrying a balance on credit cards

Twenty-somethings, for the most part, tend to avoid credit cards but the ones who do use plastic aren't paying their balances in full each month.

According to Experian State of Credit Report, millennials have an average of just over $23,000 in credit card debt.

That adds up to roughly $500 a month you're going to pay just for the minimums, which is a big chunk of change you could be using to bulk up your retirement account.

Even if your balances aren't that high, you're still essentially throwing money away if you're paying a lot for interest or finance charges each month.

For millennials who just aren't making enough yet to cover their expenses, turning to a credit card may be a necessity in the short-term.

When you're bringing in a pretty decent payday and your expenses aren't high, there's really no reason to carry a balance on your card.

Working out a clear-cut budget and tracking your spending are must-dos for 20-somethings who are jumping into the workforce.

If you know that you've got money left over at the end of the month, allocating it to specific savings goals like travel or entertainment means you shouldn't need to be putting any nonessentials on your card.

After all, you don't want to still be paying for that new pair of boots you bought at the mall last week when you're in your 60s.

4. Blowing your housing budget

Homeownership isn't as much of a priority to millennials as it's been to future generations and they make up only about 30 percent of the first-time buyer market.

For the ones who are buying, one of the mistakes they're making is getting in over their heads with a mortgage they can't afford.

In the rental market, demand has pushed rental rates to all-time highs and 20-somethings often find themselves spending a significant amount of their income to keep a roof over their heads.

Whether you rent or buy, the amount of money you're spending each month for housing affects how much you're able to save for retirement.

The longer you wait to save, the harder it is to catch up later on. If you start putting in $5,000 a year at 25 and your annual rate of return is 8 percent, you'd have close to $1.2 million by age 65.

Wait just five years to start saving and your account value drops to about $860,000. If housing is taking too big of a bite out of your budget, it might time to look for a less expensive solution.

Cutting down on the cost might be as simple taking on a roommate or two or moving to a cheaper neighborhood.

You could also give renting a room a shot if you're not too picky about having lots of personal space.

If you're really serious about reducing your overhead, you could join the millions of other millennials who have moved back home with Mom and Dad.

It really comes down to how much you're willing to sacrifice to keep your retirement savings on track.