I’m a little over thirty, and I think I finally begin to understand how to properly handle personal finances. I know exactly how not to repeat my past financial mistakes like unwanted or unnecessary expensive purchases, saving on myself. But I continue to make new ones.
When we reach our 30s, many of us have our careers on a steady path; most of us are married or are getting married; some of us have started traveling more, purchased a house and might even have a baby or two. But it’s not a time to become complacent with our finances. If we aren’t careful, we can make new money mistakes.
I guess that is true for every stage in our lives — we keep making new mistakes. But we can also keep learning from each other and avoid as many mistakes as we possibly can. Isn’t that why we read this blog in the first place?
- Buying too much for your child. I think every parent makes this mistake. In fact, compared to what I see other moms in my local mommy groups purchasing, I seem to buy very little. And what I buy is more than plenty. So I can only imagine how much money people are spending on cute clothes, shoes, blinking and screaming toys, even educational apps. I (and other parents) should just save that money and start a college fund.
- Getting married without talking about finances. Maybe money is a touchy subject for people; but by the time you have reached your 30s, you should be more capable of negotiating difficult discussions. It is extremely important to be on the same page with your spouse when it comes to money. Otherwise, it can become a major source of conflict in your married life and potentially the reason it ends in divorce. Talk about finances with the person who will share your life and develop your monetary goals together.
- Still having consumer debt. I have heard of excuses like “If only I were single, I would have paid off all this debt” or “I was paying off my debt, but we had a kid.” There will always be some new event in life; some exciting, some unfortunate. But if we choose to ignore our debt, it can become an obstacle that prevents us from pursuing opportunities that might better our lives. Take charge of your debt! Budget aggressively, earn as much as you can, and pay it off.
- Buying more house or car than you need. A lot of people move when they have children, thinking they need more room with a kid than they did before. They take the same approach with cars, trading in their sedan for a big SUV. Why? We don’t need giant homes or huge cars to raise kids!
- Keeping up with the Joneses. Speaking of giant homes and huge cars, people of all ages seem to be afflicted with the desire to keep up with the Joneses — but unfortunately, it seems especially common among 30-somethings. Maybe it’s the subconscious messaging of television advertising or the desire to be accepted in our social groups; but no matter what the reason, it is important to keep our spending within our means, forego lifestyle inflation, and chart our own financial course.
- Ignoring a will. If you have a significant other or any children, please make out a will or set up a living trust. It may be unpleasant to think about death in your 30s; but you don’t want your loved ones to go through the hassle of fighting the State to get what is theirs. While you’re at it, get a durable power of attorney and healthcare power of attorney too!
- Not having enough life insurance. Again, no one wants to think about death; but if you have anyone that depends on your income or your time, you need life insurance. And you have to get enough life insurance to cover the needs of your dependents, not just the minimum offered by your employer.
- Not having long-term disability insurance. In your 30s, the chances of becoming disabled and not being able to work are higher than death. Most people have long-term disability insurance from their employer; but you should calculate how much you need and then purchase supplemental insurance. When it comes to insurance, life or long-term disability, it is better to get your own policy and not depend on your employer (unless getting your own policy is prohibitively expensive for some reason). If you change your job, you will lose that insurance and then replacing it will be that much more expensive. This type of insurance is less expensive in your 30s than it is later in life.
- Not re-evaluating your retirement goals. In your 30s, you have a new lifestyle; hopefully your income is different now than it was 10 years before when you started saving for retirement. If your income has increased since you formulated your retirement goals, have you done the calculation on how much you need in retirement with your new income and lifestyle? If not, now is the time.