We all make mistakes, but some cost us more than others.
As you grow older, money mistakes can have bigger and bigger consequences. Financial miscues can affect your ability to buy a home, put your kids through college, advance your career or retire without worry.
It can be hard to plan ahead and know what you will want and need in the future. But, if you do map out a plan for your financial security, your future self with thank you.
For your financial happiness, here are some common money mistakes you should definitely avoid after 30.
Not having enough money saved
There’s an old saying: “If you make a lot, save a lot. If you make a little, save a little.” Whether you put your money in a savings account, an investment account that earns higher returns or stuff your cash under your mattress, it’s important to save.
According to a recent Bankrate survey, most Americans couldn’t cover a $1,000 emergency with savings. Even worse, nearly 20 percent of Americans aren’t saving any money at all. No matter what you do to earn a living, it makes sense to have enough savings put away to enable you to weather a lengthy period of unemployment or cover an unexpected emergency. If you’re not a saver (yet), check out Bankrate’s guide to reaching financial goals.
Underfunding your retirement savings
Not saving enough for retirement is the most common financial regret, especially among older Americans. Many unprepared retirees stress about their finances, run out of money or even depend on their children and loved ones for financial support.
If you start funding your retirement in your early 20s, then setting aside 10 to 15 percent of your paycheck is a good rule of thumb. If you need to play catch-up, however, you might have to put away more than that. Here’s a handy guide to retirement savings and a calculator to help you figure out how much to save to give yourself a pleasant life in retirement.
Living on credit
A Federal Reserve study reported that people who run a balance on their credit cards, which is known as revolving credit card debt, have higher credit card balances and lower incomes than those who pay in full each month. The average credit card debt for this group, which included 44 percent of American adults, was $6,600. Thirty percent of Americans have more credit card debt than emergency savings, according to a recent Bankrate survey.
Credit card debt is something you can’t afford at any age. If you fall behind in your payments because of an unexpected emergency or job loss, you can end up with a bad credit score. Poor credit can cost you in the future: you could end up paying a higher loan rate the next time you need to buy a car or home.
Not having a will
A will, generally speaking, is a legal document that coordinates the distribution of your assets when you die. And if you want to leave money to charity or name a guardian for your minor children, a will is essential.
Wills and estate plans help to cover the high costs associated with death, protect surviving family members and eliminate conflict. If you can afford to have an attorney draft your will, that’s your best option. But, if you can’t, doing it yourself is better than having no will. Nolo has good information about how to write your own will. The laws about what makes a legal will vary from state to state, so make sure you write a will that conforms to the laws of the state where you live.
Not buying insurance
If you’re still in your 30s, disability, life and even health insurance may seem like unnecessary expenses. You’ll pay for those things when you get older, you figure, when you really need them. The truth is, while you’re statistically more likely to get seriously ill, develop a disability or die as you get older, misfortune can happen at any time in your life.
By the time you need insurance, it could be too late to get it. While the Affordable Care Act allows you to buy a health insurance policy at any time and keeps insurers from excluding pre-existing conditions, you may not be able to purchase disability or life insurance if your health is already failing.
The younger you are when you purchase one of these policies, the lower your rates will be.
Putting all your money in a joint account
When you get married, part of the “for better or for worse” promise is sometimes shared finances. But it’s a mistake to put all of your money in a shared account that both you and your spouse have full rights to.
In the worst-case scenario, you could end up with an empty bank account and a partner who is MIA. It’s a good idea to keep at least one account that is just in your name so you always have access to cash.
Staying in a safe job instead of pursuing advancement
If you’re in a dead-end job, it could cost you to stay put. The average pay raise in 2018 was just 3 percent. If you’ve hit a wall with your current employer, you could increase your salary by 5 percent or more by changing jobs.
While that might not seem like a lot of money, if you add up the extra income over time, it can make a big difference in your ability to save and invest.
Not asking for a raise
It’s possible that your boss will offer you a raise without prompting, but it’s not likely.
If you think you’re not being paid your full value, the best way to get a raise is to ask for it. Don’t tell yourself the answer is no before you ask. Do take the time to do some research and prepare, to improve your chances of getting the raise you deserve.
Relying on a single income source
The traditional career path with a 9-to-5 job is still the norm in the U.S., but having a second stream of income could significantly bolser your savings. According to a recent Bankrate survey, the average side hustler earns over $8,000 per year. Despite the earning potential, just under 5 percent of works had more than one job in 2017 according to a BLS report.
Whether you drive for Uber on the weekends or sell collectibles on eBay, your side hustle can help you save more money and increase financial security if you get laid off from your full-time job or have an unexpected emergency expense.
Making emotional investment decisions
So, you’re saving and investing. Good for you. There’s still a huge money mistake that you can make: emotional investing. When the market goes down, you sell. When the market goes up, you buy. In the process, you lose out on potential gains.
If you’re not about to retire, your best course is to leave your investments alone, even when stocks go down. In fact, buying when stock prices dip will give you more bang for your buck during the market’s inevitable recovery.
Taking on a mortgage that breaks your budget
It can be tempting to get the biggest loan the bank will approve for you, but before you go for the maximum mortgage the bank will allow, you should consider the effects that repaying that loan will have on your life. The California Budget & Policy Center found that almost 40 percent of homeowners in California were cost-burdened in 2015, meaning that the costs of homeownership ate up at least 30 percent of household income. Nearly 17 percent of those people spent more than half their income on housing.
A too-big mortgage can make you house-rich and cash poor. It is also an opportunity cost, robbing you of the ability to set money aside for retirement or emergencies.
Buying more car than you can afford
When you buy a car that’s too expensive for your budget, you have sunk your resources into an asset that immediately depreciates by as much as 10 percent when you drive it off the lot and just keeps going down. A 2017 Bankrate study found that the cost of most new cars aren’t within the budget of the average American, using a standard of 20 percent down payment, a four-year loan and car payments of 10 percent of income or less.
One solution: buy a used car and take advantage of depreciation to get a good deal. You can find more tips on car buying without breaking your budget here.
Want more information? Join Money Masters, Bankrate’s private Facebook group, to get personalized advice from our financial experts.