When it comes to financial planning, the 30s are a crucial period of your life. By this time, most of us have figured out a career path, have a regular income, are married and some of us might even be proud parents. During this period of your life, you have greater responsibilities as compared to in your 20s. So, it is high time that you take special care to think and re-think about financial plans to secure your own as well as your family’s future.
However, to achieve our financial goals, it is crucial that we must avoid a few common money mistakes.
1.Not Having Clear Financial Goals
By the time you are in your 30s, you should already have some savings and ideally, you should already have started making investments to reach various financial goals. In case you have not already set specific short, medium, or long-term financial goals, you still have some time to get back on track provided you start immediately.
If you do not start goal-based investing you will be like a rudderless ship and you cannot make plans to reach your desired destination. This is the single greatest money mistake that you must avoid in your 30s. Setting specific financial goals such as purchasing a car, saving money for down-payment on a house, planning your retirement savings, etc. will help you chart the best course to reach your target.
2.Delaying Your Retirement Savings Plans
If you have just turned 30, you might think that planning for your retirement right now might be unnecessary. After all, if you plan to retire when you are 60 years old, you still have 3 decades to save for your retirement. Moreover, as compared to your 20s, you now have more financial responsibilities, so prioritizing short-term financial goals by delaying your retirement investment plans by a few years might seem like the logical course of action.
But postponing your plans to save for retirement by even 5 years, can turn out to be a financial mistake that has a significant negative impact on your ability to accumulate sufficient savings for your golden years.
3.Not Creating an Emergency Fund
By the time you are in your 30s, your liabilities such as household expenses, loan EMIs, children’s school, fees, etc. are much greater than when you were in your 20s. That’s why it becomes vital that you avoid the money mistake of not having a financial plan in place for unexpected emergencies such as job loss, unexpected expenses for house repairs, etc. by creating an emergency fund.
Having an emergency fund in place will ensure that you do not have to borrow heavily or have your savings hit zero to cover unforeseen expenses. To be on the safe side, your emergency fund needs to be sizeable enough to cover expenses for 9 to 12 months.
This might seem like a large amount to put aside. So you can start with a smaller amount such as 3 to 6 months’ expenses initially and keep adding to it over time. This will ensure that size of your emergency fund keeps pace with your income and expenses so that your finances do not get overstressed.
4.Not Buying Insurance
An increase in responsibilities means that you need to plan for a variety of scenarios to protect the financial interests of your family. While an emergency fund can take care of key emergency expenses, you must also avoid the financial mistake of not purchasing life and health insurance as part of your overall financial strategy. Having insurance is necessary to ensure that your family’s financial well-being is protected in the case of medical emergencies or your untimely death.
Buying a term life insurance policy can provide financial security for your loved ones at a low cost in case of your untimely demise. Additionally, purchasing health insurance can help you protect your as well as your family’s financial interests by covering medical bills if a family member falls ill and requires hospitalization.
This Content has originally written by Taxclue team and published on July 7, 2021. No Copyright/IPR breach is intended.