4 Money Blunders to Avoid in Your 30s
A comfortable and secure retirement is the ultimate American dream. Imagine owning a luxurious lake property and spending a few months every year on an exotic vacation. That sounds like a fantasy, but timely planning and strategic money management can help you achieve the goal. While there isn’t a proven retirement planning checklist, a commonsense approach can get you on the right track.
Let’s consider a few hard facts before diving into retirement goals and plans. Statistics show that about 10,000 baby boomers in the US turn 65 each day. The numbers indicate that the entire generation will likely reach retirement age by 2030. At the same time, the numbers do not appear great on the financial planning front. While 75% of Americans have retirement savings, only 40% feel on track.
Unfortunately, many people make small blunders early, and these disrupt their retirement goals down the line. The worst part is that most mistakes are avoidable because they happen due to a lack of awareness. Being aware and proactive from the outset can set you up for financial security in your golden years.
Let us highlight the financial mistakes you must steer clear of in your 30s to plan a secure retirement.
Blunder #1: Delaying Retirement Planning
Saving for your golden years should be on top of your mind when you are still young. According to surveys, 62% of Americans have some retirement savings at the age of 18 to 29. Starting early means you have decades to collect funds for a secure future. The good thing about saving in your twenties is that you have fewer responsibilities at a young age.
But many young people tend to postpone retirement planning because they think it is too early to start setting aside a fund for later. You miss out on the compounded value of money by having fewer years of savings. Further, you may have a smaller reserve compared to people who may have started in their early twenties.
Blunder #2: Not Building an Emergency Fund
According to Bankrate, nearly one in three Americans in 2023 has some emergency savings. If you aren’t a part of these statistics, you may not have a great life after retirement. A robust emergency fund helps you avoid debt later in life, regardless of the contingencies and unexpected situations you may encounter.
Experts recommend covering three to six months of your living expenses to stay comfortable during unexpected events such as costly medical issues or a job loss. You will probably not need to use the emergency fund, so you can pool it for your golden years and have enough to live stress-free after you leave the workforce.
Blunder #3: Missing Out on Expert Advice
Retirement planning is complicated because you need to crunch numbers to develop an effective financial strategy. The average retirement savings balance for Americans in a 401(k) plan is $118,701, while the median is only $32,689. Imagine the pain of being on the median side. It means you may end up without enough money when you retire.
Collaborating with a financial planner in your thirties is the best way to avoid this mistake and build up enough reserve for a comfortable retirement. Look for an expert to show you the way during your thirties, even if you think you can DIY financial planning, or rely on Google for valuable tips.
According to Burton Enright Welch, a professional can help you draw a plan spanning your finances, investments, and savings early. A head start puts you in a better place to build a robust foundation for your later years.
Blunder #4: Being Underinsured
Not buying insurance in your thirties is another blunder you should avoid in your thirties and beyond. As a young person, you have second thoughts about spending on insurance policies because they mean paying for something you hope to never use.
But being uninsured or underinsured can have dire consequences if you have an accident on the job or a medical emergency. Such events can wipe you out financially, leaving nothing for retirement.
Here are some forms of coverage you must buy:
- Term life insurance
- Health insurance
- Homeowners’ insurance
- Renter’s insurance
- Disability insurance
Retirement can seem far away when you are in your thirties. But it is the right time to start saving because every dollar saved now has a few decades extra to accumulate compound interest than savings in your forties and fifties.
Besides starting early, put your money in the right places, including an emergency fund, a 401(k) or 403(b) plan, insurance, and investments. Also, set aside for your kids’ education. Most importantly, ditch these financial blunders to stay on the right track.