When it comes to managing your finances, your thirties might be one of the most important times in your life. You’re past your twenties when some of the financial issues you run into could be excused to young age and immaturity, but you’re young enough that you can still start practicing some financial planning strategies that could seriously help your financial state in the future.
If you’re twenties were a little inconsistent in terms of your ability to keep up with good financial habits, you can try to avoid running into financial issues but recognizing the usual money mistakes that people make and avoiding them in your thirties.
Here are financial issues to look out for during this period of your life.
When it comes to spending money on entertainment, it can be tough to keep track of all your spending for the month. When these items and activities fall into so many different categories, it’s easy to let a few slip through the cracks. Maybe you’ll spend $200 on restaurants, $200 on 5sporting events, $200 on concerts, $100 on movies, and another $100 on any number of other things. Some of these purchases may not seem like much in the first place, but at the end of the month, you’ve gone through $800 on miscellaneous purchases. Even with the relatively solid income you might be bringing in in your thirties, that’s still a lot of money.
You’re going to want to gain some more control over these expenses by tracking them in your budget. Having a clear idea of your budget percentages and allocating a specific amount of your budget to these purchases may help you to avoid some of the financial issues that come with excessive spending.
For example, let’s say you’re spending the $800 we mentioned earlier on entertainment. Cut this number back to whatever percentage of your budget you can comfortably set aside for these types of purchases. It might not be easy to curb your spending all at once, but developing this discipline can save you the money you need to work towards your bigger financial goals.
Have you ever heard of the 28/36 rule when it comes to buying a house? This rule basically states that you shouldn’t spend more than 28 percent of your income on housing, and 36 percent of it on debt, including your auto loans, student loan payments, and mortgage payments.
A problem some people run into is that they buy the most expensive house that they can afford. And when we’re talking about a purchase as big as buying a house, a misstep here could lead to some significant financial issues.
One of the big problems with this is that your housing costs will often determine how high some of your other costs are. This can include things like your utilities, the cost of homeowner’s insurance, and even how much you spend to furnish your house.
If you’re ready to buy a house and want to keep an eye on your financial future, it might be a good idea buy a house that doesn’t max out the ratios outlined in the 28/36 rule. For example, instead of spending 28 percent of your income on housing payments and 36 percent on total debt payments, cap these numbers at 18 and 24 percent respectively. This could potentially help you to comfortably pay for your house payments – and maybe even get ahead on your monthly expenses! – but it might also help you avoid serious financial issues if you lose one source of income between you and your partner.
When your relationship starts to mature and you begin to look towards building a future with your significant other, your goals will be a lot harder to accomplish if you’re not both on the same page from a financial standpoint. It’s not reasonable for one of you to be lounging in luxury while the other one squirrels away every extra penny they have to put towards your future.
When it comes to financial planning, you and your partner need to have the same goals. If you’re both saving and have those larger scale financial goals in mind, you’ll reach them much quicker if you’re working towards them together.
A good practice to put in place is to have a regular sit-down every year, review your finances together, see how much progress you’ve made towards your goals, and figure out the best way to move forward. This meeting will also be a good opportunity to reassess these larger financial issues and objectives, and talk about savings tactics and strategies you want to implement. Maybe you need to start finding ways to save money on your monthly expenses, or maybe you need to make some more significant changes to your financial plan. Whatever it is, you’ll need to be on the same page if you want to accomplish these goals.
When you have kids, it can sometimes feel like they’re springing up right before your eyes. You’re bringing them home from the delivery room, and next thing you know you’re sending them off for their first year of college. This is a proud moment for a parent, but it can also be an expensive one. College doesn’t come cheap, so the more money you can put away sooner, the less you’ll need to worry about paying off student loans.
If you don’t want you and your child to be crippled by student debt and run into financial issues later on, your thirties are a great time to start saving. A good way to do this is through a 529 savings plan. Here are some of the key details:
For tax purposes, you gift money into your 529 plan that you would normally give directly to your child. You’re allowed to contribute up to $15,000 every year without running into the federal gift tax.
When you’re saving for your child’s college fund, it’s important to start as soon as you can. You’ll need the money sooner than you think, and when that day does finally come, those expenses – and potential financial issues – will hit hard.
While it’s good to keep up good financial habits in your twenties, for a lot of people, things start to get a little more serious when you move into your thirties. Maybe you want to buy a new car, buy a house, or start having children. Whatever it is, these things require more serious financial planning than worrying about how you’re going to afford drinks at the bar this weekend.
If you’re not careful, any of the mistakes we’ve listed here have the potential to lead you into some significant financial issues later in life. But that doesn’t mean they’re unavoidable. With careful planning, you can steer clear of these money mistakes and potentially set yourself up for a bright financial future!
Are there any financial issues we’ve missed? Share below!