Becker & Associates

11 Worst Money Mistakes to Make in Your 30's!

1. Saving too much in the wrong places.

Investing is important, but don't put off saving for other big purchases coming along, especially if you're starting to have kids or looking to buy a house, that you want to have savings for.

Contribute money towards a retirement fund but don't forget to set aside money for other things, such as a house, car, vacation, or your children's education. This could mean setting up multiple savings accounts (which, right now, are not earning much in the way of interest) or the use of interest earning Life Insurance products....kind of like killing 2 birds with one stone by protecting against the loss of a spouse you can also save and earn interest that may be much higher than any bank is paying.

2. Prioritizing your kid's education over your own retirement.

While focusing too heavily on the 401(k) is a common mistake, not setting aside enough money for retirement also remains a big issue, especially when kids enter the picture.

Obviously, your child's education is important, but your number one priority in your 30s — even if you have a family — should be retirement.  Think long term; if you don't set aside enough money for your own retirement, your child may have to support you in the future, which could end up being more expensive in the long run than student loans would be, or worse, they will have not have the abililty to help or be interested in helping you and you'll be on your own.  Helping an aging parent/s can put a damper on your children's ability to save for their own retirement and their children's education, etc.

"Make sure you're on pace for a decent retirement before you start setting aside money for college. Once you're on pace for that, and you have extra funds that you can set aside for a goal like college, definitely do that. You can start a 529 savings plan or interest earning Life Insurance products when the time is right.

3. Neglecting insurance.

Insurance in general — health, life, home, and disability — often gets put on the back burner, for two main reasons: It's not something that's fun to talk about, so it often gets put off longer than it should be.  Many times, people don't get great insurance advice. I cannot stress enough the importance of purchasing Life Insurance when you are young!  Not only will your premiums be lower for the life of your plan, but you will most likely be in your best health in your 20's and 30's.

Until people have children, they just don't seem to consider the importance of Life Insurance, but the earlier you buy, the more you'll be able to afford due to age and your health status.  Even if you purchase an inexpensive "Term" plan that has a good conversion option, it's like getting your foot in the door and "saving your insurability".  When you choose to convert it will be based on your age at the time of conversion but the rating you were issued at to start with will remain the same regardless of any health changes, weight gain, etc. and will not change or effect your premium.

4. Not having long-term disability insurance.

One type of insurance that gets neglected more so than others is long-term disability insurance, but not having it can be extremely risky.  Disability insurance is meant to provide income should you be disabled and unable to work, which is more likely to happen that many of us may think. It's estimated by the Social Security Administration that over 25% of today's 20-year-olds will be disabled before retirement.

Many people will pick up group life insurance (which you lose if/when you lose that particular job), which is usually barely enough for final expenses and covers you only if you die, but they don't think about the disability — especially if it's not paid for by the company — and that's your bigger risk. You're not dead, but you can't work, so now you have to watch yourself go broke.

5. Not talking about money when you're planning to get married.

It's not a fun or easy conversation to have, but discussing your personal finances, spending patterns, and financial plan with your partner is crucial.  Many couples often have this conversation too late in the relationship (or not at all).  By the time they're finally sitting down to discuss it, there's already a big emotional investment in the relationship, which causes couples to overlook major financial differences.  Nothing can put stress on or even ruin a marriage like money problems!

The conversation must happen, and the earlier the better. First, you have to understand the financial background of your partner which allows you to understand how they make financial decisions. Next you can move into the conversation about whether or not you want to separate finances if you're both working; if you decide to combine them, you must agree on how to spend the joint money.

6. Spending too much money on the wedding.

Too many people are spending an absurd amount of money to have a huge wedding.  Today, the average wedding costs a whopping $26,000.

Host a smaller wedding, and use the extra money to put toward a down payment on a house. Pulling off a great wedding under $5,000 is possible if you plan on a budget.  It's a better idea to go small and save big!

It does come down to personal preference; if a big wedding is important to you, that's fine — just start saving for it early on.

7. Going all out on the first kid.

When the first kid comes along, what tends to happen is that new parents will overspend on top-of-the-line cribs, bottles, clothes, and nursery accessories. Spending issues that we tend to see in 20-somethings will level out until the kids come along, and then it explodes.

You want to raise your child in a comfortable environment, but check yourself before dropping a couple grand on that fancy stroller and draining your savings, as there are bound to be unexpected costs to arise.  Also, babies grow fast!  Why spend tons of money on things that you're only going to use for a few months or even a year or two?

The worst all parents are guilty of is buying every cute toy you see.  You reason that your child "needs" this to grow up with or learn on.  Many parents come home as many as 5 times per week with "something" for the baby.  Keeping a spreadsheet of your expenditures (even the small ones like the energy drink and the candy bar at the gas station stop)  will help you SEE what you are spending and where you can cut back. 

For the cost of a toy, most 30 year olds can buy a half million life insurance policy!  Cut out ALL impulse spending and see how much you can save or invest in your insurance needs!  Most babies are happier with some pots and pans or a can full of ping pong balls than the expensive toy anyway.

8. Overspending on cars.

Another area the experts see overspending is cars. "People get bored with cars quickly. They always want a new car and so they're always dealing with a car payment.  But it's a hugely depreciating asset. You don't want to be putting a lot of money into something that's going to be worth nothing after a certain number of years.

Egan says to space your cars 10 years apart. After buying a new one (Buying a used car with low mileage could be the best deal you can get, as soon as you drive a brand new car of the lot it's depreciated (check the Kelly Blue Book on this!), be sure to pay if off in five years max; that way, for the next five years, you can build up other savings. After 10 years, hit the dealerships again. If you took good care of your previous car, you may even be able to trade it in, which will help with the payment of your next one.

Another option is leasing a car.  The monthly payment is usually much less than if you "buy" the car because in a lease situation you're only "using" the car and there is no equity at all when leasing.  You'll have a monthly payment forever doing this, albeit a lower one, because each time you turn in your leased car for a new one, the new payments start right up.

9. Going to graduate school for the wrong reasons.

Graduate school comes with a hefty price tag, which is why you want to be positive you're going back to school for the right reasons, especially if you're paying for it out of your own pocket.

It should definitively aid your career track, but if you don't know what you're targeting to do after you get the MBA, that's not the right path. If getting your MBA will help you secure a position that you want for your long-term career, then it's a perfect solution.

10. Taking a job for the short-term money.

You're preparing to enter your peak earning years by your mid-30s, and it's important to prepare for this phase of your life.

You don't want to just be taking jobs for the money at this point.  You want to be taking the job that is going to prepare you to make a lot more money in your late 30s and early 40s.  Hone your skills and be ready to be the best at what you do.  This will ensure a higher chance of getting and keeping a job and of earning higher wages or salaries. 

Look at what you decide to do as a "career" and be the one that employers are looking for like never being late, looking neat and professional no matter what your position, don't take time off for non-emergency situations (this makes you unreliable!), Do the best work you can, by just putting in the minimal required effort for the task you're given says to your employer, you don't really care about your job.

11. Assuming you'll have more money in the future.

While optimism is a good quality to have, too much can be dangerous, especially when it comes to money.

People tend to assume they'll be making significantly more money in their 40s, he explains, which they use to justify overspending in the present moment. This is the number one mistake most young people make.

The rule of thumb should be to live below your means. If you can't afford to buy the new car, then buy certified pre-owned. Savings first should be your mentality: Save for retirement first, then prioritize other things you wish to save for or spend with whatever is left over. What people typically do is the opposite of that, thinking, I've got to buy this, this, and this, and whatever's left, I'll save.

Pay your future first, and make sure your present is secure.  Be in control of your future.  It's not as difficult as it seems if you make saving a LIFESTYLE!