Five Big Money Mistakes to Avoid in Your 30s

The 30s are the most crucial times in your life. It is a phase in which you experience maturity, success and youthful energy; all at the same juncture. In other words, you are fairly experienced and yet young, which makes for a fabulous combination especially in terms of financial planning. This is the time when you are in a well-paying job with a stable career and therefore, well-suited to make investment decisions but it has been seen that many who are in their 30 do not realize the advantage they have and waste it making little or no effort in securing their future. If you are also in your 30s and not yet involved in financial planning then you must take charge of the situation. Here are five huge mistakes that you must avoid.

Ignoring health and life insurance

Many men and women in their 30s are yet to get an insurance cover. For them, it is not something that warrants serious attention and they sideline it thinking they will get it later. If you also share this mentality then you must know that health and life insurance are very important financial covers. In fact, you should get it as early as possible, in your 20s itself. Life insurance secures the future of your family against your sudden death while health insurance helps you deal with the expenses of life-threatening diseases that have become common these days. If you delay getting these two covers, you only stand to lose because when you buy an insurance policy at a later age, it costs you more and also increases your risk.

Not accounting for inflation while making investments

Investment is not just about putting your savings in a fixed deposit or recurring deposit scheme. These are traditional investment schemes that give low return and do not compensate against the rising prices. The savings that you have invested fail to keep up with inflation and when they mature, they are not sufficient enough to stand against the inflationary pressures. Mutual funds and equity funds, on the other hand, offer significantly higher return in comparison and they have it in them to counter the inflation-induced depreciation in the value of your savings. So, you must assess the future value of your investment and go for such schemes that provide a cushion against inflation.

Taking debts

We live in times where credit card shopping is the order of the day and loans the norm for buying and financing important life goals which almost always leads to debt. Unfortunately, people do not understand that they are falling into this trap and borrow loans without understanding the implications they would have on the savings. If you pay more than 50% of your income towards EMIs then it will eat into your savings and severely affect investments. Even credit card interest adds up to a good amount and nibbles your income away. So, you should avoid taking multiple loans and get rid of them at the earliest. Also, pay your credit card interest within the grace period and use it with discretion. The 30s are the times when you should spend on things that you need and not what you want. Mindless spending would only make you vulnerable to falling into the debt trap and you should avoid it at all cost.

Doing financial planning on your own

Many a time people think that they are well-versed with the way finances work and make investment decisions on their own. However, financial planning is a complex process that requires expert handling as many factors need to be taken into account. It is not as simple as saving and investing. Risk-appetite, future value of money, individual needs and many other aspects need to be examined and a financial advisor is the best option to avail, while doing the entire math as the system will help you make the best plan.

Confusing saving and investment to be the same

Saving a part of your income and then keeping it in a saving or fixed deposit account is not investment and you must understand it. Your money has to grow and generate wealth in order to be called investment and the growth that happens in the above two schemes is so minimal that it cannot be called investment. You need to invest the saved money in mutual funds and similar investment instruments to earn higher returns and therefore, you should understand the difference and take steps accordingly.

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