Getting to middle adulthood demands a shift in priorities. Once you stop needing to count the days to your next paycheck, it’s time to start planning out your financial future. There are so many money traps that can get in the way, and you may not even realize it.
Here are 7 money traps that you should avoid at all costs in your 30s.
Now that you have a decent income, don’t let your social obligations strip it away.
1. Not Tracking Food Spending:
Part of budgeting means monitoring your spending closely to help you determine how much of your consumption is truly essential and where you may need to trim the fat.
For instance, according to some estimates, an average family of four wastes $1,350 to $2,275 on food each year. Reducing consumption to eliminate that waste could result in significant savings.
You can also take a look at how much your family spends going out to dinner. A great way to cut food spending is by reducing the frequency of eating out, including lunches. Are you and your family packing lunch each day? Adjusting your consumption in these ways can help you avoid overspending — or wasting money — on food.
2. Buying a Car That’s Out of Your Price:
Don’t buy a fancy car to impress people you don’t like, just because you can. People need transportation, but there’s so much variability in price that you have to spend wisely. New cars can be one of the biggest money pits a person can get stuck in.
A car fresh from the manufacturer loses about 30% of its value in the first year, and half by the end of three years. Learning to protect and enjoy what we already have will make it easier to set aside more income for investing.
3. Spending Too Much Going Out:
Although paying for a house and car could be the biggest hits to your monthly income, you might be shocked by the effect little expenses can have. Dining out used to mean the cheap pizza joint on the corner or fast food. Now that you have more discretionary income, you may think you could step it up a little.
Everyone wants a little entertainment now and then, but you should still budget for it. Give yourself a little room to spend on the things you want to do, and keep it under control. You’ll enjoy the break all the more for the effort.
4. Lack of Savings:
Without savings, you’re vulnerable. Any unexpected expenses, no matter how small are likely to push you into debt and it doesn’t take long to get behind. Buying a house with a down-payment of less than 20% means that you are required to take out additional insurance through CMHC or Genworth and that adds to your mortgage balance and increases your monthly payment.
Too often, people are so focused on getting themselves onto the property ladder and out of the rental market as quickly as possible that they forget how much more they can save while they’re renting compared to owning.
While it’s true that real estate can be a great investment, there are plenty of people who have been burned by jumping onto the property ladder too quickly.
The key is to save as much as you can for a down payment and make sure you have enough savings to cover your moving expenses and still leave you a decent-sized contingency fund.
5. Not Investing:
Although some people put a lot of emphasis on short-term investment gains, planning for retirement is a marathon, not a sprint. The earlier you start, the more you could accumulate.
Beginning investments and retirement planning are all about the balance between paying your expenses, eliminating current debts, and setting aside money that can help pay you back.
Life moves fast, and you don’t want to lose track of your opportunities. Investing now gives you decades to pick up skills and confidence, and watch your money grow.
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6. Surprise Contest Winnings:
If you ever get an email saying you won a contest or the lottery, but you don’t remember entering, and they ask you to pay a fee to claim the prize, it’s a scam. And do not click on pop-ups that say you won an Amazon gift card or something crazy like that. It might sound like a no-brainer, but you’d be surprised how many people fall for that stuff. Sorry, I know you wanted that Amazon gift card.
7. Expensive Weddings:
I’m not sure if it’s the same for guys, but for a lot of women (and their families!), weddings are a big deal. Unfortunately, they also carry a large price tag.
By the time you’ve factored in the costs of the venue, the dress, the hair, the flowers, the vehicles, the tuxedo rentals, the food, the entertainment, the open bar, the accommodations, and the honeymoon (not to mention the rings!) it’s not surprising that the cost of the average Canadian wedding in 2021 was estimated to be over $91,000.
That’s an awful lot of money to invest in one day, and with many couples footing much of the bill themselves, it can be an expensive start to married life.