Last week, I wrote a post called "5 Big Money Mistakes to Avoid in Your 20s." The article was chock-full of advice for people starting their professional life so that they avoid some common personal finance mistakes that could haunt them for many years to come.
When your 20s slowly turn into your 30s, though, things change. You're no longer taking the baby steps in your career. You have a high likelihood of getting married and having children. However, you're also at a point where your income hasn't kicked into high gear yet.
Your 30s present a particular set of personal finance challenges, and with these challenges comes the possibility for mistakes. Here are a few strategies for avoiding some of the worst potential errors.
Mistake No. 1 -- Saving for a child's education without fully funding your retirement savings first. When you have a child, which is something people often do in their 30s, you find yourself wanting the best possible education for that child. When you reflect on your own college experience, one thing likely comes to mind: student loans.
Student loans are a heavy weight around the necks of millions of college graduates, and it's an experience that many new parents want their children to avoid. So, they'll start saving for their children's college educations early -- which is great.
The problem comes when that money takes away from retirement savings. This can create a situation where you become a financial burden to your children later in life if you don't have sufficient retirement funds, which can be far more painful than the burden of student loans. So save for their education if you can afford it, but only after you've saved adequately for your own retirement.
Mistake No. 2 -- Avoiding the "money talk" before (and during) marriage. Talking about money with your spouse (or soon-to-be spouse) can be very uncomfortable. It often requires revealing personal habits and routines that you'd rather not discuss, and for many, it can feel like giving away some personal freedom.
The truth is that when you get married, your financial futures become linked, whether you like it or not. Any extra expense your partner takes on means there is less money left over from that partner's income to handle shared expenses. Spending choices, retirement savings and everything else in between now affects both of you.
When your partner's choices impact your life and your decisions impact your partner, you both not only have the right, but the need, to sit down together, review those decisions, talk about your shared goals and come up with ways to achieve them together. That kind of talk is never easy, but without it, you'll constantly disagree with each other, and that will do nothing but cause conflict.
Mistake No. 3 -- Avoiding or minimizing life insurance and retirement savings. During a period of life when money can feel tight, when you're doing things like buying houses and having babies without having a big salary and still facing student loans, life insurance and retirement savings are easy to push aside.
However, those expenses are vital for the long-term security of the things and people you care about the most. Life insurance ensures that your spouse and children won't experience a drastic change in lifestyle should you suddenly pass away. Retirement savings means you won't have to start throwing tons of money into savings every year when you're older, as compound interest allows small savings in your 20s and 30s to grow into huge savings by the time you're in your 60s.
Don't skip out on term life insurance or retirement savings. Make them a priority. These things are important, and being an adult means taking care of them.
Mistake No. 4 -- Overspending on cars and houses. When your income finally feels stable and strong for the first time in your life, it's tempting to upgrade your lifestyle. Many people choose to do that in the form of new cars or houses, often signing up for a big fat mortgage and car loan payments along the way.
This is a big mistake. For one, those can usually be purchased for a whole lot less with a smaller house (or apartment or town house or condo) or a used car.
Avoid expensive cars and homes until you're at a financially secure point where you don't have other debts you're facing and can easily handle the extra expense even if you were to lose your job. If you're not there, wait.
Mistake No. 5 -- Assuming you'll have more money in the future. This ties into the previous mistake, but it stands out on its own because of what people do with credit cards.
During your 30s, you often begin to feel secure in your career, and that security can manifest as a sense of inevitability as you move toward a high salary that top performers in your field earn. You believe you're going to have that money soon, so why not spend some of it now?
The problem is that no path into the future is guaranteed. Many things can happen -- a change in the marketplace or a professional mistake on your part. If you've already started spending your "future money" -- meaning you've taken on debt -- you're going to be in a big hole if things don't go perfectly.
Avoid debt and spend within your means for now. If your future really is bright, you'll have plenty of money soon enough.
Trent Hamm is the founder of the personal finance website TheSimpleDollar.com, which provides consumers with resources and tools to make informed financial decisions.
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