Advice for 30-somethings
BE PREPARED: CAREFUL DECISION-MAKING CAN HELP YOU AVOID PITFALLS
The financial decisions you make can set the course of your financial journey.
Major decisions, such as marriage, children, property purchases and career changes, are hallmarks of one’s 30s, but the pace at which life moves can leave little time for careful decision-making.
Here are some financial pitfalls that should be avoided in this often-frenzied decade of one’s life:
Spending too much on the wedding
Many couples report feeling pressured by their parents and friends to have a more elaborate wedding than they would normally have opted for and they will, quite literally, pay the price for years to come. Rather than borrowing money to pay for the wedding, it would be more prudent to save towards a reasonably priced wedding, even if it means delaying for a year or two.
Ge ing married without talking about finances
With the number of blended families on the rise, merging marital finances can be somewhat complicated.
Before getting married, serious discussions about money and finance should take place.
What are your money fears? How do you feel about debt? Who pays for what? Should we operate a joint bank account? Do we have a spending limit?
An upfront commitment to honesty and transparency when it comes to joint finances will lay a healthy foundation for the future.
Making debt a way of life
Knowing that their income should increase quite rapidly in the medium-term often provides young professionals with the temptation to overextend themselves when it comes to buying houses and cars.
Statistics show that car owners in their 30s and 40s tend to have the highest level of vehicle debt.
Bear in mind that debt can keep one on a treadmill of paying off yesterday’s expenses with interest.
A certain level of good (and necessary) debt is essential in your 30s, but should not be made a way of life.
Not preserving your capital when moving jobs
The movement in careers interrupts the millennial’s savings progression, making it difficult for them to harness the power of compound interest in favour of their retirement funding.
Coupled with this, millennials enjoy a longer life expectancy than any generation before them and could realistically spend 35 to 40 years in retirement.
Regular career and job changes will provide millennials with the opportunity to withdraw their retirement fund benefits, rather than preserve their capital, which can have far-reaching consequences for their retirement planning.
Investing too conservatively
Many millennials shun the idea of a traditional retirement at age 65, intending to work for as long as possible, and this is great news for their retirement funding.
With an extended investment horizon, 30-somethings can afford to take more investment risk and should be encouraged to do so, allowing compound interest to work its magic for as long as possible.
Prioritising children’s education over retirement funding
This generation of children is faced with unprecedented options in terms of fields of study, online opportunities, short courses through some of the world’s top universities, part-time self-study courses and internships.
We need to broaden our perspective of what our children’s tertiary education will look like.
Also, as much as we would like to fund their tertiary education, we cannot do so to the detriment of our retirement funding.
Eric Jordaan is a director at Crue Invest