Your 30’s are probably the most crucial decade of your life from a financial perspective. It’s in your 30’s that accountability becomes more crucial, jobs turn into careers, families emerge from relationships, and apartments are turned into homes. In your 30’s, you need to cultivate healthy financial practices to secure your financial future, and you would want to avoid the following financial mistakes.
1. Overspending on a home
While owning a home is a dream for everyone, it doesn’t mean that you need to overspend on one. Buying a luxury home might give you comfort, but it also comes with huge expenses. You will pay higher utility bills, Youi Landlord Insurance and acquire more expensive furniture than a person living in a modest home.
It is advisable to purchase an affordable house. Ideally, the cost of the house shouldn’t exceed 20% of your monthly income if it’s on a mortgage. This way, you’ll have more money to save and invest. You’ll also pay your mortgage comfortably if you lose one source of income. Check out this finance blog for Canadians to learn more about investing in a home.
2. Overlooking financial discussion with your partner
If you are married, discussing your financial plans with your fiancé is vital. It would be best if you asked questions. How much will you spend on your home? What about other expenses? What are your plans? These questions will define your financial future.
Honesty and openness about your finances are helpful to your relationship. Like infidelity, money is a leading cause of disagreements and divorce. If you want a healthy relationship, you must be open with your spouse.
3. Conservative investment
When investing, most people tend to play it safe. The fear of losing money causes people to invest in bonds and certificates of deposit. On average, people who invest in stocks earn a 10% profit on their investment. This has been the case over the past century. On the other hand, ‘safe’ investments earn you a meager 2% yearly. Spending on these conservative investments is equivalent to servitude, as you won’t get the profits you deserve.
For instance, if you invest $10,000 on conservative investments at 30, you’ll have $18,000 at 60. On the contrary, investing in stocks will earn you $175,000 over the same period.
4. Overspending on cars
Everyone knows that a car is a depreciating asset. Still, most young people overspend on them. The thrill of driving a fancy automobile is understandable, but the cost of maintaining it can hurt your finances.
It’s best to buy a car every 10 years and ensure that you pay it off within five years. The remaining five years allow you to save enough for your next. Combining your savings with the money you get from selling your current car helps you acquire a better car.
5. Social competition and running with expensive friends
Social competition and running with expensive friends are probably the most common mistakes made by young people. Comparing yourself with others may make you develop a need for things or a lifestyle that you can’t afford.
You also don’t want to be in the company of friends who spend freely. You are likely to be caught up in the game of trying to keep up. However, it’s a game in which when you win, you lose, at least from a financial perspective.
Nothing is as frustrating as struggling with finances after retirement. If you want to live comfortably when you aren’t strong enough to work, avoid the aforementioned financial mistakes in your 30’s.