Most people in their 30s start to establish a career, build a family, and plan for the long-term future. Unfortunately, this is also the period when many fall victim to various money mistakes that can negatively impact one’s finances. We spoke with the experts who shared the different financial mistakes people make in their 30s.
Below are the top 20 financial mistakes you should avoid in your 30s, according to the pros:
1. Waiting to Make More Money Before Starting to Save More
R.J. Weiss, Founder, The Ways To Wealth
The common mistake made by those in their 30s is believing it’s easier to start saving more money once they start making more money. But, as the savings rate of those in their 40s and 50s will tell you, it doesn’t get easier. Even if you’re able to earn more, expenses tend to rise as well. More so, those who delay saving in their 30s lose out on the power of compound interest. As such, they need to save even more down the road. The most important thing to do is to start saving now. Even if that means just saving 1 percent of your income today, it’s better than none.
2. Not Getting Life Insurance
Myles Ma, Editor & Personal Finance Expert, Policygenius Magazine
When you get to your 30s, people start to depend on you. That means they’ll be in trouble if you’re not around. Think of your kids, your employees if you own a business or your spouse, especially if you share a mortgage or any other debt. Buying life insurance can help make sure your loved ones aren’t financially screwed if you die. However, lots of people in their 30s put it off, maybe because it seems complicated or dying is too early to think about. This is a mistake. Life insurance is cheapest when you’re young and healthy, and it gets more expensive if you procrastinate. If taking care of your loved ones is a priority, don’t procrastinate on life insurance.
3. Living Beyond Their Means
Lawrence Pereira, President, King Harbor Wealth Management
Since most people in their 30s are still relatively early on in their careers, they tend to make this big money mistake of living beyond their means, thinking that they have ample time to save instead of establishing long-term savings and investment strategies. Folks in their 30s are more likely to overpay for certain unnecessary expenses like a car, house, gadgets and travels and then struggle to make ends meet. Taking on too much debt is definitely a huge error here as this doesn’t leave them with many options should their income take a hit.
4. Taking on More Debt Than They Can Afford to Pay
Cornelius Davis, Financial Coach, CorneliusDavisJr.com
One of the biggest savings mistakes people make in their 30s is taking on too much debt than they can afford to pay. Many people in their 30s already have student loans. This is also the time when they choose to buy a home. It’s also likely that they’ll have an auto loan at some point during this period. Taking on too much debt creates a situation where most, if not all, of a person’s paycheck is servicing debt. This makes it extremely hard to save anything.
5. Only Paying the Minimum on Credit Cards
Douglas Keller, Personal Finance Expert, Payless Power
It’s a simple fix used to provide immediate relief for individuals facing credit card bills. Instead of paying the full amount, they will only shelve out the minimum, often not realizing the trade-off of withholding the full amount. By paying the minimum, you are agreeing to pay off the rest of the bill with a bit of interest. Not only that, but you could also be paying off the balance over the course of several years, depending on the amount charged.
6. Overspending on Rent Instead of Buying a House
Stacy Caprio, Blogger, Fiscal Nerd
Another common money mistake most 30something people make is overspending on their monthly rent as opposed to looking into a house they could invest in. Taking out a mortgage to buy your own home where you could pay it off in a few years is a more clever option than spending a huge amount of money on your rent expense. This way, you own the house which can serve as a long-term asset.
7. Fail to Get Their Financial House in Order
Julia Carlson, Financial Advisor & Founder, Financial Freedom Wealth Management Group
Another top money mistake people often make is inaction and believing there is always time “later.” There are so many changes in your 30s — you are getting older, are parents, possibly changing careers, possibly beginning to have aging parents yourselves and much more. Getting their “financial house in order” becomes a “someday” goal, whether due to lack of time and focus or due to the uncertainty of what they should do. Inaction sets in and the belief that there is always time later rob them of financial stability. Stop putting it off. By not having your finances in order, starting after your 30s, you are losing out on the time value of money. You’re not focused on paying your house off faster. You’re not knocking out debt and building savings. You should get direction and help and begin to make your finances a priority before you hit 40.
8. Dropping Out of College
Jennifer McDermott, Consumer Advocate, Finder.com
Dropping out of college is one of the common money mistakes for people in their 30s make, likely due to the fact that so many are still holding onto student debt. It’s particularly painful if you didn’t even finish the degree. A money mistake in your 30s doesn’t have to hold you back. It’s important to take action and tackle the problem head-on. If it has left you in debt, develop a strategy to pay down as fast as possible whether this means setting a budget, consolidating debts onto 0 percent annual percentage rate (APR) account, culling unnecessary spending and bringing more income in.
9. Increasing the Cost of Their Lifestyle as Their Income Increases
Drew Feutz, Certified Financial Planner, Certifiably Financial
A huge mistake that most people in their 30s make is allowing lifestyle creep. Lifestyle creep is when you continue to spend more and enjoy a more extravagant lifestyle as your income increases. Rather than continue to save more as their incomes increase, many people in their 30s begin spending more on houses, cars and day-to-day living expenses. A great way to help combat lifestyle creep is to increase your savings when you receive a raise or bonus before you consider spending any of the extra money.
10. Spending Too Much on a Mortgage
Brett Anderson, CFP, St. Croix Advisors
Probably the biggest financial mistake people make in their 30s is purchasing an expensive home and spending too much on a mortgage. It’s not until you hit your early 50s that you look back and wonder why did you ever do it and wish you hadn’t spent all that money on a mortgage payment and interest.
11. Only Having One Income Source
Lidia Staron, Marketing Communications Specialist, OpenCashAdvance
The 30s is the age bracket where people think about the long-term. Do you want to be a millionaire or maybe own a business? Whatever it is, people make the mistake of having only one source of income. The truth is, you can earn money on the side, and it is actually more beneficial to you because you might lose your primary job without a moment’s notice. Having another income source will give you that safety net so that you do not go bankrupt when you lose your main work.
12. Going Straight from College to Graduate School Without a Clear Career Path in Mind
Dock Treece, Personal Finance Writer, Fit Small Business
One of the biggest financial mistakes that people in their 30s make is that many went straight from college to graduate school without getting work experience. Many people graduate from college and go directly to law school, medical school or some other advanced program without gaining any work experience that helps them determine whether they’re on the right career path. Graduate programs are extremely expensive, so many of these people graduate with tons of debt only to find out that they don’t want to continue with their intended career. Many would be well-served getting entry-level work experience in their intended field before pursuing advanced degrees once they’ve confirmed that’s what they truly want to do.
13. Wasting Money Through Unnecessary Subscription Purchases
Lee Frush, Certified Financial Planner, Cornerstone Financial
One of the most common financial mistakes 30something people consistently make is wasting money through subscription purchases. As people get into their 30s, begin to earn more and are busy, the convenience of these services can be alluring. We see many people waste money on things like gym memberships, cable TV, food delivery, razors and the new monthly deliveries of water, food, clothing, makeup or just about anything. Paying for these on a ongoing monthly basis by credit card is like having sea waves undermining the sand out from under our financial seawall. We recommend stopping this “painless” spending and replacing it with painless investing using the same money.
14. Unmarried Couples Buying an Expensive Home Together
Michael Mandis, Founder, Alliance Mortgage Funding, Inc.
One of the biggest financial mistakes people in their 30s make is when unmarried couples — boyfriend, girlfriend or best friends — take out a loan to buy a home together that they can only afford to utilize both incomes. Many of these relationships do not last as long as the borrowers thought when they first purchased the home together. Because they need both incomes to afford the expense of the home, the breakup forces the sale of the home or even worse causes financial hardship for both borrowers. In situations like this, we find it a better strategy to buy a less expensive house that they can afford using the lowest of the borrowers’ salaries.
The lack of an emergency fund is one of the biggest money mistakes people in their 30s make. According to Debt Roundup, there are too many Americans who barely have emergency funds. They recommend saving at least $500 in a separate bank account that you can only use for emergencies. It’s also advised that you add more funds to your emergency savings account on a regular basis.
According to Gen Y Planning, couples who are in a serious relationship — those who are planning to move in together or get married — are recommended to discuss financial matters. Since money is one of the most common issues between couples, it’s important to discuss a mutual agreement on how to handle the household finances, including issues on saving and spending. This is to avoid arguments or fight about money later on.
ArthaYantra Corporation says that many 30something commit the same mistake of overspending on their children’s necessities with the intention of providing the best for them. Spending too much on things like cribs, strollers, nursery accessories and other baby stuff may drain one’s savings without them realizing it. Some young parents also fancy buying expensive things for their children even if they will just outgrow them soon enough.
While you’re in your 30s, Fair Isaac Corporation recommends that your investment strategy should lean toward its maximum growth potential rather than being too conservative. Investing more aggressively while you are young is a wise thing to do since you still have more time to let your investment sit and grow. As you get older, that’s the time when you should shift to a more conservative investment.
Another mistake that people in their 30s make is not having a proper budget in place. Sterling Group United suggests that it’s important to establish a realistic budget to gain insight into your income, expenses and savings. Not having one may cause a big financial worry later on as you won’t know where your money is actually going.
If you’re an employee, you should make sure that you understand the benefits offered by your employer. Take advantage of these benefits while you are still employed with the company like the covered medical checkups, travel allowances and more. According to Mountain West Farm Bureau Mutual Insurance Company, any benefit that you are not using is lost money to you.
The Bottom Line
As you grow older, you’re entrusted with more responsibilities both at home and at work, and this is when life becomes more serious. If you want to achieve financial stability, set your finances straight, create a budget, live within your means, minimize debt and plan for the future. Also, avoid the above money mistakes people in their 30s typically make.