When it comes to living dangerously with your finances, it seems as though your thirties are the most dangerous decade. Obviously you have to be mindful of your money habits throughout your life because it’s possible to screw up with you’re very young and very old, but special care should be given to the dangerous thirties. This is the decade that can doom your future goals or set you up for great success and even early retirement. Choose your actions carefully and you could enjoy a great life, or make mistakes from which you never recover. Why are the 30’s so dangerous? Here are some reasons:
Access to more credit
Okay, maybe you came out of college and went through your 20’s with some student loans and credit card debt that you wish you didn’t have. Chances are, though, that the damage wasn’t worse simply because you couldn’t get much credit. You didn’t make much money with your first crappy job so it was harder to get big loans and credit card lines. This changes in your thirties. Chances are that your salary has gone up and now you have lenders looking to give you access to more “easy money.” Big problems can come with that credit if you take too much and don’t use it wisely.
Keeping up with the Joneses
When you’re young, you (usually) can’t keep up because your finances won’t allow it. Even if you want to try, chances are you’re only trying to surpass the other recent college graduates on your block and the other poor schlubs hanging on to the bottom of the career ladder with you. But with the thirties comes the move to a better neighborhood, friends with high paying/high spending lifestyles, the desire to impress your bosses and coworkers with clothes, cars and meals out, other parents who watch (and judge) how much you’re spending on your kids, and all kinds of other pressures to “keep up.” When you get older you get wiser and stop caring about what other people think, but when you hit your thirties, that desire to keep up can be overwhelming and lead to poor financial decisions.
While there are many who have kids in their 20’s, more and more people are putting it off until their thirties. Kids are expensive. While you can mitigate the expense somewhat through frugal living, there is no denying they add to the financial outlay. And more kids = more money. Once you have kids, a whole other world of “keeping up” opens up to you. Suddenly you have to have to have a big SUV, the private school, and the kids have to have all the gadgets and the “right” clothes. And don’t forget college, if you plan to pay for any of it. You may not get back to your full savings potential until they leave home, which may mean you’re close to or over fifty and facing retirement very soon.
The thirties is the decade when a lot of people buy houses. While owning a house can be great, buying more than you can reasonably afford can doom you. So can constantly moving, upgrading, and remodeling. Chose your housing wisely and try to get it right the first time so that you don’t eat up all your equity every time you move. And don’t forget to take taxes, maintenance, and insurance into your total costs of ownership. The mortgage isn’t the only payment you’ll have to make.
When you’re young, single, and unencumbered, you can move anywhere for a job, work all day and all night if you want to, live cheaply with roommates, and eat ramen noodles every night. The older you get the less flexible you become. If you get married, you can’t just up and move without taking another person’s opinion into account. Having kids removes even more flexibility because there are schools and activities to be sorted out. Having a family means that you probably aren’t willing to work three jobs anymore so your earning power may go down. And your grocery budget will go up because suddenly you have “health concerns” and a family that all require better nutrition. Ramen noodles don’t cut it anymore. If you lose a job or have some other financial problem, cutting back and making sacrifices isn’t as easy as it once was.
Marriage is a wonderful thing, but it can bring complications. If you marry a spouse who brings a lot of debt to the marriage, or poor financial habits, it can doom you. The wedding itself can doom you if you go into significant debt for it. Then there’s the weapon of financial destruction known as divorce. It doesn’t happen to everyone, but if it’s going to happen it seems as though the chances go up in your late thirties after you’ve been together long enough to discover the wrong fit. A divorce can set you back financially for years, whether you’re the “wronged” spouse or not.
Hopefully by the time you hit your thirties you’ve settled into some stable work and you’re being rewarded for it with more money. More cash can equal more problems, though. While some more money is probably necessary to live, it’s also possible to blow a lot more of it on stupid stuff and then wonder in your forties and fifties where the hell the money went. Save those raises!
Putting retirement savings on hold
With all of the expenses mounting up, a lot of people stop or greatly reduce their retirement contributions in their thirties. This is a mistake. Unless you saved a boatload in your twenties that is still sitting there growing for you, you’re missing out on a prime time to increase your contributions (and even that boatload, if you had it, could use some help). If you assume that you’ll just put off saving until you’re in your forties or fifties, you’ll never be able to fully catch up. Money saved later in life just doesn’t have the same amount of time to grow as money saved earlier.
Loss of one income
When the kids start to come along, one parent will sometimes choose to stay home with them. There’s nothing wrong with this as long as you can afford it. It can become a problem, though, when there isn’t enough income to cover daily life and put some into savings for the future. Choosing to stay home is great, but you have to understand the impact it may have on your future plans and adjust accordingly. That may mean that the stay at home spouse needs to work part time, or go back to full time work sooner than would be ideal. Staying home when it puts the long term financial picture at risk is a move that can doom you.
All of us do stupid things when we’re young. Sometimes it’s just because we don’t know any better, and sometimes it’s because we’re trying so hard to fit in. Either way, being stupid about money can wreck your financial future. Don’t wait until you’re in your forties or fifties to learn about money. Learn while you’re young. And get over the idea that you have to impress or fit in or that you can somehow spend your way to happiness and acceptance. A lot of us reach the realization that blowing money on unnecessary stuff is simply a waste, but we reach it too late. Wisdom isn’t only for the older among us and the sooner you wise up, the better off your financial picture will be.
Many people make a concerted effort to save more in their forties and beyond, but if you’ve caused massive damage in your thirties, you’ll be so far behind that you may never recover. If you have to waste a lot of years first cleaning up the mess before you can begin to really save, you could be in your sixties before you’re really able to save a lot of money. And then guess what? You’re close to retirement or you’re being pushed out of the workforce and it’s too late. The thirties can be a lot of fun, but be vigilant that they don’t ruin the rest of your financial life.
(Photo courtesy of Philms)