8 Costly Money Mistakes 30-Somethings Make

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You just turned 30 and you finally have a handle on your finances. But being 30 brings a whole other set of money challenges – buying a home, starting a family, and planning for your retirement are now on your radar. We’re there with you.

Here are the 8 worst things to do with your money in your 30s:

1. Getting married without talking about money

It’s not a fun or simple discussion to have, but discussing your personal financial resources, investments, and financial strategy with your potential spouse is essential. The earlier the discussion takes places, the better. Nowadays it’s common for both partners to have student debt from college and even graduate school, and those numbers can add up quickly.

Did you know that, according to CNN Money, more than half of all law school graduates have at least $141,000 in student debt! Payments on that debt can be upwards of $1,000 per month for 30 years. Yes, 30 years! And getting married means you’re taking on your partner’s debt as well, so you need to have that conversation to make sure there’s no surprises.

2. Not buying insurance

Now that everyone has to have health insurance due to Obamacare or pay a penalty, odds are that you have it. If not, it’s probably a good idea to go get some anyway. One accident or unforeseen illness can bankrupt you and your family. But there’s also a host of other insurance policies you should be looking at as well. But other insurance policies as a whole tend to get overlooked. Do you have renter’s or home insurance? Life insurance? How about long-term disability insurance?

Insurance helps protect your money, assets, and overall lifestyle, and most policies are pretty cheap. For example, for life insurance you could look into term-life instead of whole-life insurance if you want to save some money. But you should realize that each comes with its own disadvantages. While term-life is cheaper now when you’re young and healthy, when the term is up (say 10 or 20 years) you’ll be that much older and it’ll be more expensive to purchase another term policy because you’re more likely to have health issues.

Whole-life insurance is more expensive but it’s great if you can afford it because – like its name suggests – it’s for your whole life, so as you get older your premium won’t increase significantly, if at all. It also starts to accrue a cash value that you can borrow against for a number of reasons, such as purchasing a home or even paying for your child’s college tuition.

3. Buying a larger home than you need

By the time your 30, many people start to grow tired of paying rent. Why pay someone else’s mortgage when you could be paying your own? Indeed, buying a home is a fantastic financial investment. Not only do you get valuable tax benefits, you also earn appreciation on what’s likely to be your largest asset.

Nonetheless, lots of people put themselves in more debt than they can handle by getting a house that is too big for their budget and for what they need. A larger home not only tends to mean a larger mortgage, but also a lot more taxes and higher utilities. It’s better to start small and go bigger when you need to (and when you have more money!)

4. Splurging on your first child

We all want the best for our children but it’s possible to do so on a budget. You don’t need that $1,000 state-of-the-art stroller when a couple hundred dollar one will do the same thing. Also, think about reaching out to a family member or friend that has had kids and see if they’re willing to give you some hand-me-downs. Then take those savings and put it into a college savings account. Your child will get a lot more out of a lower tuition bill than they’ll ever get from that designer onesie they’ll never remember anyway.

5. Paying too much for the wedding

A wedding is often the most memorable day of your life for most people. However, so many are spending a ridiculous amount of money on a huge wedding. According to the wedding site, The Knot, the average price of a wedding today is $31.213, and approximately $204 per guest according to CNBC. Instead of having a large wedding ceremony, you could put down a larger downpayment for your home instead, or perhaps even renovate part of your house.

However, if a large, expensive wedding is what you want, then it makes sense to start saving early on. Open a new savings account and put away $100-150 per month. That way, you’ll hardly notice it out of your monthly budget – it’s the cost of eating out a few nights a month – and you’ll be able to have the wedding of your dreams (but on a budget.)

6. Overspending on material things

For several, there’s a motivation to show their success by spending money on appearances, such as a fancy car, designer clothes, or an overly expensive house. These things may be nice but they are also expensive. Sure, one measure of success is money, but buying things unnecessarily will only give you a fleeting sense of satisfaction. And there are many ways to show success.

A better use of your money is to pay off your credit cards or student loans, or buy important things, such as life insurance. Even though you’re saving, you can even splurge once in a while and take a nice vacation. If the people around you only care about which designer’s clothes you’re wearing, then they’re probably not the best people to be around anyway.

7. Going back to graduate school

In many cases, increasing your level of education is a good decision. But it’s also incredibly expensive so you need to be sure it’s worth it. You should only go back to school if you have a clear reason to do so, and a goal for after you graduate. Going back because you’re bored and can’t think of anything better to do is a losing proposition. However, wanting to change careers or get a promotion is likely a good one.

But you still have to do a cost-benefit analysis to determine whether the potential increase in salary outweighs the sticker price – after all, with the ever-increasing cost of tuition you’ll likely be paying off that bill for a long time yet. If you decide to make the plunge, don’t forget to see if you qualify for any financial aid, such as merit scholarships, grants, or tuition reimbursement from your employer. Every penny counts.

8. Postponing saving for retirement

When you’re in your 30s retirement still seems pretty far away, after all you still have 25+ years! But the catch is that your retirement account will be much larger the earlier you start thanks to a little thing called compound interest. The sooner you begin saving, the more interest you’ll earn on your principal and even the interest that’s already been accrued.

As an example, if you buy $1,000 worth of stock at 30 and earn an average of 7% interest per year, you would have $10,677 at age 65. But consider this: investing that very same $1,000 at age 45 would give you only $3,870 at age 65 – that’s a huge difference!