Your thirties are a transformative decade. This decade often marks a period during which jobs turn into full-fledged careers, apartments are traded in for houses, and relationships lead to families. It’s also a time when your financial missteps—or the positive steps you take—can have ripple effects. Blunders and oversights in this decade can impact your long-term financial well-being. Read on for the top five mistakes people make in their 30s and tips on how to avoid them.
1. Lifestyle Creep
One of the most common mistakes people make in their 30s is social comparison bias, aka “keeping up with the Joneses.” It can be tempting to compare what you have and don’t to your neighbors, friends, and family—particularly this era of social media that broadcasts the highlights of people’s lives. This can lead to lifestyle creep, in other words spending money you don’t have. Over time, this can derail larger financial goals such as the purchase a home. Keep in mind that not everyone has the same income or financial obligations, so comparison is a losing and even inaccurate game. Instead, focus on your own financial goals and work toward them with responsible planning.
2. Carrying Too Much Debt
Among the generations, millennials, many of whom are in their 30s, have the fastest-growing debt load. This isn’t necessarily surprising given this generation also has higher than average student debt. A Harris Poll identified that students took out an average of $21,880 in student loans. Add on other forms of debt and this number only grows. The Experian 2020 State of Credit report found that the average millennial has about $27,251 in non-mortgage debt. If they’re able to afford a home, millennial homeowners also carry an average mortgage balance of $232,272. While some of this debt may be considered “good debt,” in other words credit that pays dividends over time like investing in a home or increasing career prospects, not all of it is. Carrying too much debt can drain your budget and delay forward-looking financial goals, such as investing.
3. Avoiding Important Money Conversations with Your Partner
Americans are waiting longer to get married and are living together to test the waters of marriage Whether you’re married or cohabitating, one of the biggest mistakes you can make is avoiding honest and open discussions about your finances, debt, spending habits, and goals. Key conversations include whether you prefer separate or joint bank accounts, whether you’re comfortable carrying debt or prefer to live debt-free, your investment risk tolerance, or whether you’re a saver or a spender. Getting on the same page with your partner around money can set you both up for better financial futures.
4. Not Saving Enough for Retirement
Just over a quarter of people in their 30s start saving toward retirement. Few are saving enough to reach the $1.7 million Americans are estimated to need to retire comfortably. People in their 30s have a tremendous opportunity to harness the power of compound interest, in other words, interest that pays interest on your returns. The longer your money is invested in a 401(k), IRA, or Roth IRA, the more your money can grow exponentially. Experts recommend putting away at least 10% of your income each month toward retirement. If you have an employer-supported retirement fund, be sure to max out the contributions they will max.
5. Not Having an Emergency Fund
The unexpected should be expected. At some point, you’ll encounter an event that causes financial strain, such as unemployment, illness, injury, or a large, unanticipated expense such as needing a new roof or a new car after an accident. Not having an emergency fund to help bail you out in these instances can cause financial catastrophe. If you don’t have enough money set aside at the moment, set up automatic payments from your checking to a designated savings account until you do. Ideally, the fund should contain enough money to cover six months of your household expenses.
If you’ve already made one (or more!) of these missteps, don’t fret. It’s never too late to change course and pay down debt, have tough conversations, or start the savings habit.
We hope that keeping in mind these common mistakes can help you avoid or correct them and that together, we can help you build a bright financial future.