5 Financial Mistakes to Avoid in Your 30s
Those of us in our 30s are well aware that this is the decade in which everything happens.
At work, you're most likely building on the momentum you started in your twenties, with an eye toward securing promotions and reaching career highs. You're probably doing a lot of other things outside of work, too, like having kids and/or traveling (without a backpack this time) and/or partnering and/or buying a house.
Along the way, there are a few sensible financial choices you can make right now that “Future You” will be grateful for.
That being said- there are several financial mistakes you can *easily* make and today we are sharing some of the most common ones to avoid.
Financial Mistakes to Avoid:
1. Not Having a Plan
We know life happens and things can take you by surprise. Next thing you know, you have kids, a house, you need a new car, you have unexpected expenses, you might start dipping into your savings. So, it's really important to have a financial plan to help give you some guidance and keep you on track. Having a financial plan will allow you to prepare for these events and ensure that you are saving ahead of time so that you can afford those unexpected costs.
2. Living or Spending Beyond Your Means
Simply put, ”living above your means” means that you are spending more money than you are earning. People usually do this by using credit cards, loans, and earlier savings to pay for their expenses. However, this method is not sustainable, and will eventually catch up to you in the form of high debt and neglected savings.
As a result, it's crucial to understand what your net income is and know your limits. This can help you ensure that your expenses stay within your budget's parameters and keep you from falling deeper into debt.
3. Not Having Insurance or Being Covered Properly
Disregarding insurance or not having adequate coverage is a recipe for disaster. As you begin to have other dependents, such as a spouse or a child, you'll want to be sure that you have enough life and disability insurance to cover them in the event that you pass away or something happens to you. There is no denying that you will have greater peace of mind if you know that you and your loved ones are financially secure from various unforeseen situations.
Another big one: Buying a home.
You want to make sure that you increase your insurance when you become a homeowner. Why? This insurance covers losses and damages to your personal residence, as well as furnishings and certain other assets within your home. It can also offer liability coverage against certain types of accidents that occur within your home or on your property.
4. Not Saving Enough $$$
Many young professionals think to themselves, "Oh, you know what? I still have some time before I retire. I have 20-30 years left." We’ve heard it many times. By having this mindset, you're missing out on the many benefits of compound interest. Trust us, you don’t want to do that.
Compound interest is what happens when the interest you earn on savings begins to earn interest on itself. As interest grows, it begins accumulating more rapidly and builds at an exponential pace. This is crucial for your money, especially when it comes to your retirement accounts. It’s no wonder that it's often referred to as the ‘eighth wonder of the world.’
5. Only Making Minimum Payments on High-Interest Debts
Making headway on that high-interest debt, or even paying it off entirely? That feels fantastic.
We won't lie to you: Whether you have a lot or a little debt, paying it off can be a journey.
When you just make minimum payments, that money goes toward any unpaid interest first. And then you can get charged interest on your unpaid interest. Aka it compounds.
As a result, your minimum payments may not make a significant difference in the underlying balance - if at all.
This is why it's so important to try to make higher-than-minimum payments in order to lower your obligations and pay them off as quickly as possible. You'll be able to save a lot of money this way.
We hope this was helpful! If you're approaching or have reached your 30s and feel compelled to seek professional advice, we'd be happy to speak with you about any concerns or questions you may have.
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