It’s a known fact that the most life-changing decade of our lives is our 30’s. This is when we go from taking random jobs to building an actual career or starting a business. Casual dating is replaced with serious relationships that eventually lead to starting our own families. We consider moving from rented apartments to buying houses. This is also the period when healthy financial habits can have a positive and long-lasting impact on your financial future.
Unfortunately, financial mistakes also happen during this period that can derail one’s long-term financial well-being. Here are the Top 5 mistakes to avoid.
- Keeping up with the Joneses: A lot of people have dug themselves into financial debts because of unhealthy competition with their peers. The advent of social media has made it much worse because people now compete with strangers online. People need to understand that social comparison is very dangerous. The person you’re comparing yourself to may not have as many responsibilities as you do and therefore has more money to spend. The best thing to do is to focus on your goals, the luxury lifestyle will always be attainable, it doesn’t matter how long it takes you to get there.
- No Spending Plan: A popular saying is that if you fail to plan, you plan to fail. It is very important to have a spending plan, popularly known as a Budget. Having a budget helps to track your cash inflows and outflows and makes it easier to know when to spend and when to save or invest.
- Buying a Luxury Car Prematurely: A lot of people make this mistake. When buying a car for the first time, your focus should be on the necessity and not luxury. Luxury cars cost a fortune to maintain and many people do not know this until they start using these cars. You should only buy a luxury car when you attain a certain level of financial freedom and can afford the expenses that come with it.
- Not Investing Enough: As inflation increases, it has become imperative to invest to ensure that your spending power is not eroded. At some point, the 50:20:30 personal finance rule will no longer be effective. The rule simply means that 50% of your income is for necessity (food, shelter, clothing, and everything you can’t survive without), 20% is for savings and investment, and 30% for lifestyle choices ( e.g. vacation and entertainment). We recommend increasing your savings and investment to 40% and find creative ways to reduce the percentage set aside for necessity and lifestyle choices.
- Not Planning for Retirement Early Enough: Many people make the mistake of thinking that they have plenty of time before they retire. The earlier you start saving for retirement, the better. Whether it’s an employer-sponsored retirement plan or a personal retirement plan, the bottom line is that you need to start saving for your retirement as soon as possible. It’s also interesting to note that people who plan to retire early end up being richer than their peers. When you have a mindset to retire early, you consciously put more effort into increasing your earnings, spending less, and saving more.
Your 30’s are a very critical part of your journey to attaining financial freedom, making the best financial decisions will keep you on the right track. What other financial mistakes do you think one should avoid in their 30’s?