If you’ve reached your 30’s and it is more like The Great Depression. Let’s look at how you may have got here (also check out What NOT to Do in Your 20s). If you’re just starting out this decade (go team early 80s), here is a list of pitfalls to avoid.
Here is some helpful advice on what NOT to do:
1.) Get overwhelmed with debt.
Statistics seem to reflect that people wind up in debt most often in their 30s. You’ve got people with lingering credit card debt or still trying to pay off their student loans. And then you’ve got new debt, since most people buy houses during this decade and then populate their homes with little money suckers known as children. Be realistic about your finances. It might benefit you to put off owning a home longer than you’d like to get your other debts in order. Paying your mortgage shouldn’t take more than 25% of your income.
2.) Quit saving for retirement.
Yes, it’s like squeezing money from a stone, but your retirement planning goals can’t fall to the back burner during this decade or you’ll be in a world of hurt later. If you have populated your house (or rented apartment) with little money suckers, make sure you are saving for your retirement first and their education second. There are loans that can help them, but none that can help you in retirement… other than the little money suckers themselves.
3.) Never start an emergency savings account.
A whole lot of debt comes from being unprepared. If you never start an emergency savings account, your credit cards are going to take a major hit to pay off insurance deductibles, bills incurred if you get injured until workman’s comp or any other insurance kicks in, or if you get laid off. It will be cheaper (and interest free) to pay for those kinds of things from your emergency savings account instead of freaking out while you watch your available credit limit shrink and shrink and you realize what that interest rate information really meant on the sign up flyers.
4.) If I ignore it, it will go away.
FYI – this will never solve any real problem ever.
5.) Compare yourself to other people in their 30s.
Because clearly if Johnny has a car, a house, a wife and a child, you are a failure if you do not. If you actually try to keep up with the Jones’ in this decade, you are so screwed. In your 20s, the vast majority of people around you are broke as a joke. Everyone is just starting out in their careers. People doing a little better financially are all getting married and buying homes, which leaves them equally broke. In your 30s though, it seems to be a free for all. The people with the house and the wife from their 20s are either still broke as a joke cause they’re divorced and paying alimony. Or they bought a house that was way too expense. Or they actually did it right and are actually in a pretty comfortable position. The person who stuck it out with the same company for the last 10 years is now making a nice paycheck and the person who bounced from job to job (i.e. me) now makes less they did in their midtwenties. So if your friend has a gorgeous dress from White House Black Market that makes you froth at the mouth, just shake it off and own your “frugal-vintage-quasi hipster” look. At least it’s a legit look these days. For all you know, her credit card bills are a hot mess.
6.) Assuming that if you’re offered a bigger line of credit, you have to take it.
If you know you’ve had a shady past with credit card debt, keep your credit limit nice and low. Will your credit score be a little less awesome? Maybe. But it will be better than the damage you could do if you fall off the wagon with a $5,000 credit limit as opposed to a $35,000 credit limit.
7.) Ignore your health.
Health care is expensive, even with insurance. If you get really sick, you have to miss work. Buy things like cold medicine, tissues and orange juice that have nothing to do with your health insurance. Have your spleen removed. The list never ends. As you get older, you need to be more on top of this, because it will save you money in the long run. You need to start visiting doctors and dentists before your body is screaming in pain.
8.) Borrow money from your IRA or 401(k) to pay bills.
This is a horrible, horrible financial plan. You are better off taking out a loan. Seriously. If you’ve hit the point where this seems like a legit approach to you, find a way to put together enough money for a visit with a financial advisor. They can help you get your money in order and save important accounts like those retirement accounts. You may not like their plans, but they will save your butt. And if you’ve hit this point, your own financial planning is probably not so hot in the first place.
So, if you’ve been avoiding those pitfalls, way to go! And if you’re looking for some even better financial advice, check out my Rafflecopter giveaway of Dave Chilton’s The Wealthy Barber.