You’ll soon be turning 30 and with so many important events in your life at this stage, you’re sure to need tips on money mistakes to avoid in your 30s. Investing in your 30s is mandatory, if you want a smooth ride for the rest of your life.
You are young. You have a steady job. You might have just reached major milestones, like a steady job, marriage, children and even your own home. You feel like just splurging and enjoying life to the hilt. The future does not bother you much.
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Nothing wrong with this policy, that’s fine, as long as you are young and earning a steady income. But then retirement is always on the horizon and you have to start making plans to create a solid nest egg for yourself and your family.
You must be financially ready for retirement by the age of 67 and need to do most of the savings before 40 by avoiding money mistakes.
Here are the Top 3 Money Mistakes You Need to Avoid in Your 30’s
#1. Extravagant Lifestyle
This is one of the top money mistakes you need to really avoid in your 30s. If you check out your social media accounts, you bet you’ll be bombarded with videos of your friends’ extravagant lifestyles. But beware!! Consider the all-important question: What do I want to do in life? Keeping up with the Joneses is only going to bring in a lot of unnecessary bills.
- Even if you make big money, have one car for the family. You can save on fuel; insurance; and maintenance costs, as part of tips for money management for young adults.
- You are sure to make money in your 30s. But opt for public transportation if possible. It will work out 80% less than maintaining your own private car. Biking or walking to work are also good options.
- How to manage money in your 30s? Live in a smaller home. Sure, you can afford a bigger home, but you can be equally comfortable in a smaller home outside the city center. This could help you save a large amount every year and help you make serious money. Totally worth it.
- Try other methods of frugal living, like reducing electricity bills, magazine subscriptions, bad habits like alcohol or quitting cigarettes and so on.
#2. Conservative Investments
If you’re in your 30s, you’ve probably settled down in a good career. At the same time, you’re also dealing with student loans and if you have a family and a house, there’s childcare, mortgage and the rest to deal with. But this is no excuse for not making investments.
As part of tips on money management for young adults, investments are a great means to build wealth. Even small amounts can make a whole lot of difference. Compound interest is that magical fairy dust, you need to sprinkle it on your finances to avoid money mistakes.
- How much to save for retirement in your 30s? Why not increase your contributions towards the 401(k) plan. At least make sure you get the full match from your employer, as it is an integral part of smart investments to make in your 30s. Increase it regularly, and especially when you get a raise. Set up auto increase, as it offers one of the best ways to invest money in your 30s.
- How to manage money in your 30s? Consider alternative savings like Roth IRA or a medical savings account, as they are among the best investments to make in your 30s.
- Check out apps like Acorns for saving change. Any purchases you make are rounded off and the change is put into savings.
#3. Not Sticking to a Budget
If you have never budgeted, you have to kick start this habit right now. You have childcare to think of and college bills in the near future. What’s budgeting basically? That’s a no brainer.
Say your takeaway per month is $2000, you have to cover expenses of housing and food; insurance and investments; repayment of debts; and entertainment within that amount. To put it in a nutshell, you have to spend less than you earn and get your priorities right, so that you don’t make money mistakes.
- Things to do in your 30s: Calculate your income post tax. Of course, you can add any automatic deductions like 401(k) contributions or health savings, so that you get the correct picture about your finances.
- Select a good budgeting plan, with amounts set apart for emergencies as well.
- Use budgeting tools for tracking your progress, like Clarity Money or Mint and check out suggestions.
- Do you really have to buy that home? Sometimes renting a home can be more expedient. It depends on how long you’re planning to remain in one location. Also, negotiate to get a good mortgage rate. Do some research. If you move, you can continue to keep the house and rent it.
- Automate savings so that you don’t need to make extra efforts and don’t get tempted to spend it. Use money diaries for reminders, with a pen and paper instead of apps to avoid money mistakes.
- Keep tweaking your budget, as your priorities could change with time. Today, you might need to spend more on entertainment; tomorrow it could be on childcare.
A rough spread would be around 50% of your post tax income, another word for money available on hand, on basic utilities; groceries; housing; insurance; transport; and child care; another 20% for repaying debts and for savings.
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The rest of the 30% can be for personal wants. This is different from needs. Wants include dining out; travelling; entertainment; buying gifts; a gym membership. It differs from person to person and includes anything you desire for fun.
Ask yourself, what do I want in life? It’s fine to splurge a bit in your 20s, but you need to take a wake up call in your 30s. Get a good grasp over your finances and stay on track, before hitting the 40s to avoid money mistakes. Take that time travel and commute with your self down the line to about 70 years of age, as it is a significant aspect of financial mistakes to avoid in your 30s.
Whatever monetary habits you inculcate today will echo down the decades, so these wisdom tips can prevent you howling over money mistakes you made in your 30s.