If you’re like many 30-year-old Americans, you probably spent your 20s finishing up college, finding your first real job, taking some risks, making connections and hopefully having some fun.
Now that you’re in your 30s, you’re moving into a different realm. These are the years to firmly establish yourself in your career and begin climbing the corporate ladder — or perhaps breaking out to forge your own way as a millionaire. You may also be thinking about building a life with a partner, having kids and planning for your long-term future.
This is also the period when many fall into major money pitfalls that sap their finances for years — or even decades — to come. With so much going on with work and life, it’s easy to focus on the here-and-now and put aside your bigger financial goals. However, this will leave you scrambling later in life. Think of this article as a map to help you bypass those monetary gaffes.
Avoid these 6 money mistakes in your 30s, and you will set yourself up for financial freedom in your 40s and beyond.
#1 Carrying too much credit card debt.
Credit cards can feel like a solution when you just need a little extra help to get you through to your next paycheck. Credit cards can be a useful tool to help you establish credit and earn points or rewards or allow you to make online purchases. But credit card companies make their money off of your dumb financial mistakes, namely, impulse purchases and buying things you really don’t need.
If you don’t pay your cards off every month or, worse, if you only make the minimum payment, you will end up paying for those items several times over. Credit cards are infamous for their fees, interest rates and hidden rules in their fine print, and it will be difficult for you to catch up once you fall behind.
#2 Not diversifying your income.
Most of us treat employment like we would a relationship. We are faithful to a single career or a single employer at a time. We pour all of our time and effort into establishing ourselves in our primary place of work and eschew all else. But when it comes to making money, it’s okay to have something on the side!
In fact, diversifying your income will give you a backup if something happens, and you find yourself out of your primary job. Think of this as a chance to broaden your interests or explore different areas. There are tons of ways to build a second career or money-making venture on the side. Having more than one source of income means more money to invest and save for future projects.
#3 Not having a financial plan when you move in with a partner.
It’s no shock that more Americans are waiting longer to get married. And more people are living together before marriage, testing out the waters for long-term cohabitation and companionship. It all sounds wonderful — until you have to decide how to divvy up the bills.
One of the biggest mistakes you can make is not having an honest and open discussion about finances, budgeting, debt and spending habits before you take the plunge and merge your lives. It may feel awkward to have this conversation, but it’s important you understand where you are each at financially and how your monetary habits may differ. Getting on the same page will help keep money concerns from overshadowing and affecting your relationship.
#4 Overspending on housing expenses.
You can imagine how awesome your life will be when you’re living in that apartment with the view of the river. Or how swanky you would feel to live in a trendy, up-and-coming neighborhood. One out of three Americans make this mistake, and live in a housing market where they are spending more than 30 percent of their income on rent.
Think of it like this: if you take home $1,000 in income, but spend half on a house, you only have about $33 a day to pay for all the rest of your expenses — not to mention saving for upcoming purchases or investments. Don’t fall into this overspending trap. It will suck away money you could be investing elsewhere and leave you constantly scrambling to cover your expenses.
#5 Not saving money for upcoming expenses.
While you are busy socking away funds in your retirement accounts, don’t forget to set aside money for other big, upcoming expenses. Someday you’d like to own a house, buy a new car, take a trip around the world or help put your kids through college. These major goals come with big price tags that may seem insurmountable, and they could put you in serious debt.
But a little forethought will go a long way toward making these goals a reality — plus reducing your stress over finances. Set up multiple savings accounts to start setting aside money for specific purchases. Have the money come out through automatic transfers so you won’t miss it.
#6 Overspending on kids.
At some point in life, you may find yourself cradling a bundle of joy — a tiny person you are willing to do almost anything for to ensure their safety and happiness. For many people, that includes giving them the absolute best of everything, from top-of-the-line nursery furniture to brand-name clothes.
A word of caution — check your spending before your money disappears into a puff of toys, gadgets and baby accessories. Does your bouncing baby really need that fancy stroller? Or would it be more helpful for you all in the long run if that money went into an investment fund or savings account — or went to pay off debt? Don’t let emotions rule your purchases, for baby or for you.
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