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Congratulations, you made it to your thirties, now you just have to make sure to avoid the dumbest things you can do with your money. Many people in their thirties have finally gotten to a point where they have enough cash to be stable, have a reliable job, and are starting to make longer term financial decisions. While you should celebrate your new place in life, you also need to make sure to that you are planning to have an even more successful future. In order to keep the good times rolling, be sure to avoid these dumbest things to do with your money.
Invest and Forget
By the time people reach their thirties they usually have some kind of investment, be it just some small stocks inherited from a relative or some sort of retirement account. When these accounts are first set up you determine how the account works, what levels of risk to take, and other important factors. Frequently these settings will be forgotten. This is a terrible mistake, as your needs change as time passes. Continuing to pour money into an investment account without changing the way that the account is managed is a recipe for potential disaster in the future, as you may find yourself overexposed to different risks that were acceptable in your twenties but are no longer worth the hazards. Make sure to check your account settings so that you can be confident you will meet your investment goals.
Paying for Things Work Will Cover
Many jobs have an assortment of benefits in addition to retirement and health benefits. Make sure that you aren’t spending your money on something that your work will help pay for. Possible examples include being compensated for transportation costs, as well as various kinds of flexible spending accounts, or FSAs. Flex accounts let you allocate pre-tax money to different things such as healthcare or dependent care, so you can save for unforeseen expenses and reap tax benefits from doing so. Paying for something out of post-tax dollars when you have an FSA is one of the dumbest things to do with your money.
Live the High Life
There is an understandable temptation to improve your quality of living when you start settling down and earning a more substantial income. There is nothing wrong with planned luxury purchases. However, these must fit into a budget that takes your broader savings goals into account. Try not to let yourself become jealous if someone else buys a nice item that you would like but do not need. Examples might include new tech or a new car. Unless you have planned and budgeted for the purchase or need to replace a vital item you should try to avoid splurging on these unnecessary luxuries.
Flat 401(k) Contributions
As you work you should see your pay rate go up. Make sure that the amount of money you are putting into your 401(k) goes up along with your salary. This is essential to making sure that, when you retire, you have enough money to maintain the standard of living that you have become accustomed to. Moreover, if you can contribute even larger parts of your salary to retirement you may even be able to retire early. The amount of enjoyment you will get later in life as a result of increased 401(k) contributions is well worth the tradeoff with having more cash on hand right now. A failure to increase your 401(k) contributions with your salary could result in having to undergo some dramatic adjustments later in life, including possibly being forced to sell a home or property, or canceling retirement travel plans.
For far too many people the only investment they have is the 401(k) offered through their work. As you age, it is important to diversify your investments so that you can shield yourself from risks facing the market. Additionally, other investments may give you the option to generate better returns or allow you to take larger risks with bigger payouts. Keeping all of your investments in a 401(k) is like keeping all of your eggs in one basket, you’re asking for trouble. Failing to diversify your investments is one of the dumbest things to do with your money and thus is something that everyone should want to avoid.
While health insurance is frequently obtained from your workplace, there are many other types of insurance that are wise investments that your workplace may or may not offer. For example, long term disability insurance is something that many experts recommend people get in their thirties. One of the greatest assets you have during this part of your life is the amount of working life you have left to generate funds. Should you suffer from an accident or disability and lose that asset, you will likely find yourself in a very tight spot. Long term disability insurance protects against these unfortunate and unforeseeable events and will let you have the confidence that, should the worst occur, you will be able to maintain your current standard of living.
Failure to Communicate
If you are thinking about getting married or living with a significant other, you should make sure that there is a clear understanding about who is responsible for what aspects of your joint lives. While some may find this conversation uncomfortable it is far better to have it early and be clear about what everyone’s roles and responsibilities are than to risk a fight later on when something hasn’t been taken care of due to confusion or vague divisions. Spending on personal luxuries when you have unpaid bills that you don’t even know about is a sure way to feel stupid and put yourself in a rough financial spot.
As you can see, there are many ways to be dumb with your money. However, for each way to be dumb with your money there is also a way to be smart with it. Make sure that you are practicing the best possible financial management practices so that you can live the life that you want to. Don’t fall prey to the dumbest things to do with your money.