6 Money Traps to Avoid in Your 30s
Getting to middle adulthood is just an abrupt shift in priorities. Within your 20s, you left college and started a new job, and that usually means an increment of income.
As soon as your budget starts to consolidate we are already in our 30s, however, bad decisions might take you back a few years in your savings.
So, as a 31-year-old with a fair share of bad money decisions, I’ll leave you with some warnings that might help you with your financial decisions for the years to come.
Spend too much on night outs
We as humans crave some form of social interaction, preferably a positive and fun one. Regardless of being extrovert or introvert, the need to be around people will always pop up and when it does it can sure be a hazard for your wallet.
Everyone deserves to have some fun, regardless, not considering leisure as a budget expense will most surely escalate its expenditure. Just limit yourself to a certain percentage of your salary and manage it according to your social needs.
For instance, I usually stick to 5%, and when I go out to eat with friends or family, I tend to choose the cheapest option on the menu. Chances are the meal will be tasteful and I’ll still be able to enjoy their company without breaking the bank.
Expensive relationships
Love is blind, or so people say. But what people don’t say is that love also tends to be expensive and, in some cases, debt-inducing.
People tend to manage money differently, some have expensive tastes, others are just plain frugal, nonetheless, you’ll almost surely end up falling in love with someone that has a different view on money.
Failing to communicate how you work and spend your money, with your significant other, will be a major problem to your relationship. If you don’t find a middle ground that is sustainable for both your needs, sooner or later money will be the root of all discussions.
And this can extend to other family members — trust me, I’ve lived both sides of the spectrum.
Buy a brand new car
So the dashboard of that used car you bought in your early twenties is looking like a Christmas tree and you are thinking of giving it the much-desired retirement. Fair enough. Go look for another used car then.
Sure you’ll think you’ll be set with a brand new car that will last a decade or more, but the truth is, the money spent will surpass by far what the car has to offer. Once it leaves the dealership, it will lose value up to 30% in a year, and 50% in 3 years. Within those 3 years, the car will still be in mint condition — if you take good care of it — so the best course of action is to look for a 3-year-old car that will serve the same purpose for half the cost of a brand new one.
Buy or rent an expensive home
You are now at a point in your life where you start to plan the future and see the actual value of a home. You think of how many bedrooms your family might need, so you look for a 4 bedroom used unit in a fancy neighborhood, near the most essential public services, like hospitals and schools.
However, the purchase you’re considering might hinder your budget. If you buy a really expensive house, you’ll be jeopardizing your budget for the next 30 plus years. Also, you’ll find yourself saving less money for any emergencies that might appear.
Sure you can choose to rent the house you live in now — if you bought it — however you conditioned yourself to an additional and unnecessary new real estate process.
When it comes to buying a house, you should always consider every element around it and more often than not it is better to look for new expanding areas of the city you live in, since the cost of the land will surely be lower than the already developed areas.
Plus, you’ll guarantee an increase in the value of your money, since historically real estate tends to rise as time goes by.
Relying too much on credit cards
Credit cards can either be a powerful tool or your kryptonite. It all depends on how you use it. There can be benefits to them, but a lack of control will push you to an uncomfortable financial situation, as interest payments will eat up your budget.
I’m aware of the popular USA credit score system, but since I never experienced it first hand, I can’t go into detail about it. In the country I live in, Portugal, the benefits of using credit cards are insignificant, so I just avoid using them.
Just do a quick Google on the best credit card options in your country and stick to a budget that doesn’t exceed your income — duh!
Not investing
Investing — the topic of the hour!
The pandemic sure brought a new perspective on remote work and investments, but as I talk to more and more people about it, I realize that few people actually save money, and even fewer seek to invest it.
Usually, the argument is that investment is either only for the millionaires or that the gains don’t justify the hassle. Either way, what people fail to understand is that investing isn’t a sprint, it’s a marathon, and it can be adjusted to your beliefs.
The sooner you start investing the more you’ll be able to accumulate. And the formula is simple: budget so your expenses don’t surpass your income, eliminate any debt and save and invest any exceeding money.
There are so many options to invest and most of them can be done through your smartphone: stocks, crypto, NFTs, bonds, real estate!
If you start as soon as possible and do this consistently you might even find your retirement day coming sooner than expected.
There you go! Avoid these money traps, and you are set to a more financially stable adulthood.
