Money mistakes at 30
Is it better to get it right or not to make mistakes? When it comes to money, your future will be defined more by the mistakes you avoid than by your successes.
Money mistakes can be a burden when building your financial future, and they actually have an advantage over successes: they are much easier to identify. These money mistakes evolve with you and are not the same in your 20s as they are in your 30s.
After a decade of testing, by the time you turn 40 you will have identified and even overcome the most common money mistakes from your 30s. However, the interesting thing is to know beforehand what the typical financial mistakes of 30-somethings are in order to avoid them.
Putting it all on the house and the mortgage
The decade of the 30s is the time when many people choose to buy a house. In fact, almost 60% of Spaniards will buy their home between the ages of 25 and 44.
Buying a house is the definitive move towards settling down and does not have to be a mistake in itself. The financial pitfall in this case comes from the way most people will buy their home: with a long-term mortgage and squandering all their savings on the transaction.
Without realizing, you are turning your home into your main investment (sometimes even your only one). To avoid falling into this trap, there are four things you can do:
- Be clear about the costs of buying a house versus living in a rented one.
- Avoid very long term mortgages, where you will pay a lot of interest.
- Do not get to the limit of your ability to pay, so that you still have room to save.
- Do not invest all your savings in the house, so that you keep at least your emergency fund.
Neglecting your future, not saving or investing
At the age of 30 you should start thinking about your future, if you haven’t done so already. Starting to save late is one of the common retirement planning mistakes in your 30s.
The sooner you put your financial plan into action, the better. If you are still not saving, start doing so, and if you already do and have your emergency cushion, you can move on to the next step: putting your money to work to secure your future.
Assuming you’ll have more money in the future
One of the reasons many people in their 30s don’t save is because they assume they’ll have more money in their 40s.
The reason is simple: during the first few years of your working life, your salary improves relatively quickly. It is easy to assume that this will be the case for the rest of your life. Nothing could be further from the truth. Nothing and no-one can assure you that you will earn more at 40 than you did at 30, for example.
For that reason, you should not assume that you will have the option to save more in the future, because that may not be the case. The solution? Live within your means and save a percentage of your salary every month.
Guiding your career according to your immediate salary
Everyone likes to earn more money and have a better salary, but in your 30s you still need to take a longer-term view. In other words, think more about your career than any immediate payoff.
The second half of your 30s is when you typically enter your prime earning years. It’s important not to sacrifice that possibility for a job that pays you more in the short term, but with less chance of promotion, for example.
Spending too much on your wedding (and getting into debt)
The average cost of a wedding in Spain is 16,000 euros, a figure that is possibly more than you initially imagined. However, it’s easy to start adding up expenses and arriving at that almost without realizing it.
Instead of opting for a more modest wedding or doing without certain expenses that don’t really add value to the wedding, many people choose to take out a loan. Financing the wedding will cause you to spend even more than you intended and will be a drain on your financial future and the new life you’re about to start.
Wanting to have a better car than your neighbor (or at least the same as them).
One of the factors that most influences the cost of a wedding is what your friends’ weddings were like. It is normal that you want yours to be the same or even better, regardless of your family’s possibilities.
The same is true for many other expenses in your life. A car is one of the best examples. Having certain brands or models is a status symbol and if you don’t have one, it may seem that you haven’t succeeded. Your 30s are the perfect time to change that perspective, to start thinking about what’s important to you and not to other people.
Does having a more expensive car align with your life goals? Does it really make you happier? Is it necessary to change it every three years? Wouldn’t a more economical car fulfil the same function? And finally, think about the money you could spend on that car that you could have used to correct some of the previous mistakes.
Now stop thinking only about your car and apply this same system to the other financial areas of your life. Having a worse car than your neighbor or the same one, but having it because you love driving and it is very important to you will change your perspective on money.
Spending too much on your first child
This is an often-repeated mistake by first-time parents. Who doesn’t want the best for their first child. This desire translates into a series of expenses that, with time and the experience of more family, are easily avoidable.
You may realize that you could have bought a lot of things second-hand, that a non-branded stroller would have been fine and not cost hundreds of euros, or that you didn’t need so many clothes.
Freezing your financial plans for the arrival of children
This money pitfall at 30 is a direct consequence of the previous one. Since the arrival of a child alters the family finances and involves a major expense, many couples choose to put their savings plans on hold until they can adjust to the new situation.
In reality, what you should do is save even more to ensure both your future and that of your children. It is true that you will be adding expenses to your budget, but others will disappear or be reduced. In addition, with a child come certain expenses that you know you will have to cover sooner or later, such as paying for their education.
In fact, another common financial mistake is to prioritize the children’s education over retirement savings.
Falling into the credit card debt spiral
Getting into debt today is very easy and doing it with a credit card is even easier. Many cards today offer revolving credit, where you can spend up to a certain limit and then pay off only a small fixed amount each month. This formula is as convenient as it is harmful to your finances.
This is a sort of perpetual debt on which you will pay a lot of interest. If you don’t want to fall into this spiral, try using a debit card for all your day-to-day expenses.
Finally, a classic mistake in your 30s and beyond is to forget about your own education. The best way to ensure your future is to invest in yourself and your career.