1. Carrying Credit Card Debt
Notice I didn’t say, “Carrying too much credit card debt.” because ANY amount of credit card debt is not OK to carry!
According to a 2018 NBC News study, almost half of U.S. millennials say they currently carry credit card debt (46 percent), while just 36 percent reported having student loans.
In your 20’s you graduated college and hopefully have paid all or most of your student loan debt by the time you’re in your 30’s. Debt has become the norm in your life, including credit card debt. Although most 20 somethings rely on credit to get them by, you cannot continue this cycle in your 30’s. Now is the time to eliminate all evil credit card debt!
This is not to say having a credit card or frequently using a credit card is bad, but carrying a balance is. Carrying a balance and paying interest is one of the dumbest things you can do financially. I don’t care if it’s only $100, carrying that balance and paying interest is just plain dumb. If you currently are doing this then you need to make it priority number one to put an end to it.
If you take away only one thing from this article, then let it be this: Get rid of that high interest card, right now! There are plenty of credit card offers that have 0% interest for 12-18 months and will allow balance transfers for a fee. Do the balance transfer, pay the small transfer fee and put forth as much money as you can monthly to paying that card off as soon as possible.
Have bad credit?
Can’t get approved for a 0% card? Listen really, really closely. You are now going to make it your mission to pay off that high interest card as fast as possible. Going out to eat or for drinks? Forget it. New tattoo? Don’t do it. Fancy new watch? Nope! How about that new 70″ flat screen TV? Not today buddy! You aren’t going to spend on any wants, only needs, until that high interest debt is gone! It doesn’t matter if it takes a year or two. Just stick with the plan and get it paid off.
This is the number one worst money mistake people in their 30’s make!
The secret to building true wealth is having compounding interest working for you, month after month, year after year. When you carry a credit card balance and are paying interest monthly instead of earning it, you are doing the exact opposite! You are making the banks rich!
2. Relying on One Source of Income
You might love your job, your boss and your co-workers. You are loyal to them, you don’t plan to leave anytime soon, maybe you’re even a lifer. That’s great and everything but, you are allowed to make side income and should. It’s not cheating on them I promise!
Your primary income is probably your full time job. But what about secondary more passive sources of income? What if those could eventually keep pace with your primary income or even surpass it?
If you don’t find a way to make money while you sleep, you will work until you die.
– Warren Buffet
There are plenty of side income ideas you can do, you don’t need a second job to achieve this and shouldn’t get a second job. The whole point is to make income while you’re working, playing and sleeping, on the side, passively.
The fact of the matter is the average millionaire in 2018 has seven or more sources of income. If one source of income goes away suddenly, it’s unfortunate. But they will be just fine because they have six more sources of income.
Can you say you will be fine if you lost your job tomorrow?
Blogging is arguably one of the best passive side incomes. Once you build a blog and start getting traffic to it, the money will soon follow. And the best part is you already did all the work and can sit back and reap the rewards for years to come.
Check out our article on How To Start A Blog In 5 Easy Steps In 2019 and How To Make $200 Per Day With A Blog Explained Using Math.
Also check out our article on 54 Ways To Make Side Money That You Haven’t Thought Of
3. Not Investing Properly or at All
In your 20’s, investing for retirement was probably not at the top of your priority list. If it was and you started early, then you have a tremendous head start over the majority.
If you are not investing at all and you’re in your 30’s you need to get on this immediately! The difference of starting now and in your 40’s is huge. With compounding interest and re-investing dividends, a 10 year head start can add up to hundreds of thousands more for your retirement.
Most financial advisors recommend investing 10% of your income. I say more, try to get at least 20%, the more the better, some people even invest as much as 50% of their income. Treat investing like a bill, put it on your monthly bills list the same as your car loan, mortgage, and cell phone bill. Except your investment account needs to be the first bill paid, above all others.
Let’s be honest. You may also want to consider hiring a financial advisor to help you figure out what you need to do financially.
Where to Put Your Money?
The truth is, a savings account just won’t cut it. Most savings accounts today have an APY of only 0.05% – 2.5%. Historically, the rate of inflation is around 3.1% per year. Meaning if you merely put your retirement money into a savings account, you would be losing money over the years as you are not even keeping up with inflation.
If your employer offers a 401k with a match, you should take it. It’s free money and tax deferred money at that. Be wary of 401k’s with high expense ratios, the fees can sometimes be high enough to question if it’s worth it. But, if your employer is matching contributions 100%, I would certainly contribute up to that amount, even with higher fees.
Stocks, Bonds and Mutual Funds.
Opening a brokerage account has never been easier or cheaper. I would not recommend selecting individual stocks for retirement because of the high risk involved.
An index fund such as the Vanguard Total Stock Market Index, ticker symbol $VTSAX, mimics the entire stock market and is diversified enough to be a safer bet for the long term and also has a low expense ratio.
You can also invest in index funds that are a combination of stocks and bonds for a more conservative approach. Although, in your 30’s, you shouldn’t be too conservative just yet. A more aggressive approach is appropriate because you’re not going to be retiring in the next coming years and can absorb market volatility more so than a soon to be retiree.
Some mutual funds have consistently out performed the S&P, however, just like the 401k, be wary of high fees. Those high fees can eat away thousands of dollars over the years.
Between your 401k and a solid index fund or mutual fund, you should be well on your way to a nice and possible early retirement, especially if you’re investing 20% or more of your income. Consult with a certified financial advisor if you are not feeling comfortable tackling all of this on your own.
Check out our article: Best Kept Investing Secret For 2018-2019? Review Of The M1 Finance Platform
Real Estate Investing
Buy and hold real estate investing is a great way to build massive wealth. You buy a property and rent it out, the renter is paying off your mortgage while simultaneously the housing market is (hopefully) increasing. Your net worth can see huge gains every single month.
The draw back here is the risk and hassle of dealing with tenants. A good property management company and thoroughly screening tenants can avoid all of this.
The barrier to entry for getting approved for a cash flowing rental property is high too, typically 20%-25% cash down needed, plus the cost of initial repairs.
Investment properties are a great investment and can be considered “good debt” if you plan it out correctly. But for most people, the initial cash needed is just too far out of reach. If you can swing it, then go for it!
Consult with a licensed realtor that has experience with investment properties before doing anything. And do as much research on your own beforehand to protect yourself from getting into a bad situation.
4. Not Tracking Finances and Budget
Be honest, in your 20’s, like most of us, you were basically winging it when it came to your finances. This lifestyle is irresponsible and risky.
Every cent that you earn and spend should be tracked.
There’s really no excuse not to do this in this modern computer age. A simple excel sheet can do the job. Or there are free apps like Mint and Personal Capital. These apps allow you to enter all of your financial accounts and will keep track our your debts, assets, income, net worth and spending.
Check out this article: If You Aren’t Using Personal Capital To Track Your Finances, You Are Missing Out.
It would be impossible to have a budget much less stick to a budget if you aren’t tracking these things. Make a plan and stick with it. This is the perfect opportunity to add that 20% of your income into investing. You can also find which bills should be reduced or eliminated all together.
A perfect example of this is your cell phone bill, insurance bill and cable bill. Find a way to save here and invest the difference!
Check out our articles related to this: Why You Should Shop Auto & Home Insurance Every 12 Months – The Complete Guide , Paying Too Much For Your Internet? Try These Tricks
5. Not Getting Life Insurance Soon Enough
Life insurance is one of those things, that when you need it, it’s too late. It’s better to prepare for these things well in advance before it’s too late.
Life insurance isn’t for you, it’s for your loved ones. If something were to happen to you, you have peace of mind that the loss of income that your family incurs because you aren’t there anymore, is not a financial burden for them.
Life Insurance Doesn’t Have to Be Expensive.
To avoid it being expensive, get it now. The cheapest it will ever be is today. This is because rates are heavily based on your age and health. You are the youngest and healthiest right now, and you never know what tomorrow holds.
Term life insurance is king. Term insurance means you have the policy in place for a certain pre-determined amount of time, typically 20-30 years. After that period it cancels. If you followed the advice in step 3 and invested properly. You should have enough cash to be self insured in 20-30 years. No longer needing life insurance as your investment accounts have, hopefully, millions of dollars in them.
Whole life cash value or permanent life insurance is not recommended. Insurance salesman want you to believe this is the best product out there because it builds cash value and earns interest. It’s not the best product! And life insurance should never be treated as an investment, because it is not. These policies are very expensive and the return on investment is very poor, severely under performing the S&P in most all cases.
Buy term in your 30’s and invest the money you are saving by not having an expensive permanent policy into an index fund or mutual fund. Your future self will thank you.
Consult with a licensed trusted insurance agent or certified financial advisor. Make sure that they’re sincere about helping you and not just making a huge commission off you by selling you an expensive policy.
6. Letting Your Career Flatline
In your 20’s it was the pinnacle of your career growth. Drake said it best, “You started from the bottom and now you’re here.” But should you stop excelling and become complacent with your now mid-level position now that you’re in your 30’s?
You could, and many people do. They peak career wise in their 30’s and stay with the same company in the same position until retirement. Taking the measly 2-3% yearly raises, which by the way, are only keeping you up with inflation. So it’s really no raise at all. Inflation is a different issue all together and one that is out of your control.
But what if you could continue moving up the ladder or even just get a massive raise in pay?
It could mean a substantial difference in your retirement age, total retirement amount and overall quality of life leading up to retirement.
If your employer is loyal to you and taking great care of you, by all means stay where you are. But if there’s room for you to grow professionally and financially, well then, it may be time to consider trying to negotiate with your boss and/or looking around for a new employer.
This can be a touchy subject for some, as a career is almost like a marriage for some people. If you put your emotions aside and look at it logically, it really makes no sense to stay working somewhere that is not compensating you appropriately.
In this modern internet age, websites like Glassdoor and Indeed make it possible to look up median salary based on your job type, experience and location. If there is a big discrepancy in salary, you owe it to yourself to investigate further.
I would say to also consider how many years experience you have compared to your job title and your equal peers job titles. Maybe you got left behind during promotions and this is the reason your salary is not where it should be based on your experience.
Check out our related article: How I Managed to Get a 70% Increase in My Salary
7. Buying a Home and Car You Can’t Afford
Keeping up with the Jones’s is not just a saying, but, it is a reality for most 30 somethings. The newly built, extra large house in the gated community with the two brand new 30-40 thousand plus price tag vehicles in the garage is the new norm it seems in 2018-2019. Oh and don’t forget about the boat, we won’t get into that here though.
It’s mostly all show. Most of the people that appear “rich” are secretly in deep debt they may never be able to get out of. Not to mention they’re not able to save or invest because of it. I’d be willing to bet only a small fraction of people in their 30’s are debt free and on their way to financial freedom and early retirement. But at least they have those shiny materialistic things right?
Don’t fall into this trap in your 30’s. Buy what you can afford even if the bank is willing to give you more, going into massive amounts of debt you can’t afford is just plain stupid.
A $523 monthly payment is the new standard for car buyers.
In 2018 the average monthly loan payment for a new vehicle hit an all-time high of $523 in the first quarter, according to Experian. The average amount borrowed by buyers of new cars also climbed to a record high of $31,453.
What’s even more frightening is the new norm in 2018 for a car loan term is 72-84 months. Vehicle pricing keeps going up, so to make vehicles more affordable, banks and automakers offer longer loan terms, resulting in a lower monthly payment but extreme amounts of interest paid. Good for the banker, not so much for you.
A lot of financial experts recommend keeping total car costs below 15% of your take-home pay. And not taking out more than a 48 month car loan term.
For example, if your monthly take-home pay is $3,000, your car payment would be about $300 and you’d plan on spending another $150 on automotive expenses (fuel, maintenance and insurance). 3000 x 0.15 = 450.
The Average American New Home Build in 2018 Is $395,000.
US average sales price for new houses sold is at a current level of $395,000, up from $379,000 last month and up from $394,000 one year ago. This is a change of 4.22% from last month and 0.25% from one year ago. Source: Census Bureau
Most financial experts agree that no more than 25 percent of your take-home income should go to a mortgage payment. This means if your take-home income is $3,000 per month then your mortgage payment should not be more than $750 per month.
Of course most mortgage lenders will allow you to go much higher than 25 percent, even in this post 2008-collapse era with new lending restrictions. And most people do borrow WAY more than they should, because they take the top number the bank will allow and that is the amount of house they’re buying.
If we look at the numbers, most financial experts recommend 15% of take-home pay for a car loan with expenses and 25% of take-home pay for a mortgage. Now we are at a total of 40% of take-home pay used for the car and house. Factor in investing at least 20% for a total of 60% automatically gone each month. This leaves 40% left for food, entertainment and all other miscellaneous bills.
On a $3000 a month take-home pay your car payment with expenses should be around $450, mortgage around $750 and investing around $600 for a total of $1800. Leaving $1200 for all other bills and food, and of course other wants and luxuries. Adjust these numbers based on your take-home pay and see where you end up, it may surprise you.
The average 30 year old today I can tell you is nowhere near this budget.
These numbers are what financial experts recommend. I would bet to say an average 30 something year old’s car loan is more like 30-35%, mortgage is more like 35-40% and investing is less than 10% of their take-home pay. It’s just in our human nature to spend as much as we earn. Even when our income goes up, we will match it with our spending. It’s time to break that bad habit!
If you’re currently over the recommended percent on your car and/or house payment here’s some advise: either make more money with a side income to make the percentages fit, or get rid of your expensive car(s) and possibly get a less expensive house. Of course each situation is different, and this should only be used as a guide to help you get on the right path.
This concludes the 7 WORST Money Mistakes to Avoid in Your 30’s. If you found this article helpful, please share it. We also look forward to hearing from you in our comments section about your personal experience with money mistakes in your 30’s.
