Moving from your 20s to your 30s, the next phase of life will bring in more stability and a higher standard of living. However, it also brings in more responsibilities as you will likely have more people depending on you, and you will need to start thinking about your future.
Many people in their 30s make the mistake of thinking it is too early to start thinking about planning for their finances since they plan on working for two or three decades. The problem with this ideology is that this is the time when you make significant shifts in your life. They can be in the form of owning a home, family planning, children’s future and your retirement. Mentioned below are some of the financial mistakes you can avoid.
In this phase of your life, you will have secured a regular and stable source of income. It is the perfect time to plan out your short-term and long-term financial goals. Setting financial goals gives you clarity on your priorities and aligning your lifestyle to your future goals. Long-term goals require a disciplined approach to saving and investing, while short-term goals will help you realise how to budget your monthly payments. Your financial goals will likely make your spending habits better.
You could retire in the next two or three decades. You even could plan to have an early retirement at 50. Retirement is inevitable. Being devoted to your work might make you forget that your retirement is only getting closer. It is important to start keeping aside funds to secure a smooth post-retirement life. You can start investing early since compounding will help you in getting exponential returns on the investments you make.
Like responsibilities, liabilities also increase with time. In uncertain times, like the pandemic, securing some amount for unfortunate events like unemployment, medical emergencies, etc., provides a safety net. You can keep an amount equivalent to six months to a year’s expenses as an emergency corpus.
You might think that you have 18 years to think about planning your child’s higher education finances, but that is not the case. You have 18 years to start saving and investing enough to become enough at the end of the 18 years. The cost of education is increasing over the years, and it is advisable to take up two to three career choices as a reference to plan out how you should start investing.
Since you now have more disposable income, going on outings, expensive vacations, dinners and retail therapy might sound extremely lucrative. While all these expenses are necessary to a certain extent, it is crucial to keep a budget control on how much you should ideally spend on expenses that are not immediately required. You can use the rule of 50-20-30 to help you budget your monthly payments.
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