I’m nearing in my thirties, and I know that generally, you’re thirties are the most expensive years of your life. So instead of spending on what is considered socially normal in the next decade, I’ve come up with a list of 6 money pits that I’m going to avoid like the plague.
You see, once you hit your thirties you might find yourself with some extra cash. The days of having to live paycheck to paycheck are coming to an end. But when you started to make a little more money your lifestyle tends to inflate with this extra money that is coming in. Rather than spending this money on lifestyle inflation, you really should get your financial future sorted first.
The first time someone might start thinking about putting a financial plan together is often when they first start making more money than they need for the day to day basis. Let’s be honest- it’s only when you have extra money that it seems worthwhile to make a financial plan. If you are spending everything you earn on living expenses- what’s the point?
But now you have extra “disposable income”. First of- I really hate that word disposable income. It sounds like you should just be throwing this money away. Where did that saying come from? I think, much like engagement rings, it has probably come from advertising sometime in the past. Making you feel like it is OK to spend money- since it’s “disposable”.
Now you have extra “disposable income”, you should make a plan. But for now, let’s talk about some of the things you should avoid spending all that disposable income on. Don’t let social pressure persuade you to fall into these six money pits. You should avoid them at all costs.
When you start making decent money you often feel pressure to buy a car to flaunt your wealth. Cars are status symbols in our modern society. But what you don’t know when you are younger is that no-one really cares what you drive.
The problem with cars is in buying a car that is out of your price range. And buying a new car is the worst.
The biggest money pit you can get sucked into is buying a brand new car! Especially in your thirties. This is the time you really want to build up some investments as then they will have decades to compound. But a brand new car does the opposite. A brand new car will drop in value by around 30% in the first year.
I know this pitfall quite well. I’ve always liked cars- and I’ve spent my fair share of money on cars. I’ve even gone down the route of buying a Mercedes. But, it wasn’t new. In fact, I imported it second hand from Japan at about half the going price locally. So it had already lost most of its value. I’ve now had about six years of relatively issue free motoring with it. But it still cost much more than a Corolla or Camry.
Think about it. You wouldn’t put money into an index fund and expect it to drop in value by 30% in the first year, and it keeps dropping year on year. But somehow with new cars, this is OK?
The first few years of owning this Mercedes made me feel cool and important. Now, I don’t seem to care much about it anymore. And in some ways, I think I need to get rid of it for a more practical vehicle, maybe one with a tow ball to haul a trailer with.
Kiwi’s are obsessed with homes and property. The pitfalls when it comes to homes and properties is again, buying one that is too expensive to early on in your life. Owning a home is good, don’t get me wrong. They generally increase in value over time, but there is a price point of diminishing returns.
You know you have a home that is too expensive and you are funnelling every dollar into the mortgage. When this happens you can’t afford to have money left over for emergencies. Or even money for investing. Having a home that is too expensive can also have a large strain on a couple.
There are a few things you can do to avoid overspending. Try to buy something that you can improve rather than something that is perfect. It’s generally better to buy the worst house on the best street than to buy the best house on the worst street. This has been the tried and true method of many Kiwi families. It’s the reason why we have such a strong DIY culture. It’s the weekend, off to Miter 10 or Bunnings anyone?
Spending too much on going out is another big-money pitfall.
This is especially true today when the vast majority of people are struggling to save for a deposit on a home. The idea of having enough for a deposit on a house seems so impossible for many people, and some just give up and instead spend money on going out.
Of course, I think it is good to go out and socialize with friends. But you just have to keep an eye on how much you are spending and if it is really the best use of you’re money. In your thirties, you might think that you deserve to go to the fanciest restaurants and buy the expensive wine, but in realities getting pizza at the local bar while enjoying a beer with friends will give you the same experience for at least half the price.
We tend to like to go to food truck markets and sit by the beach during sunset rather than being waited on at a fancy restaurant. I just think it is strange that the more expensive a dish gets, the less food you get. What’s up with that?
4. Significant other
This might be controversial, but your significant might be a money pit.
When your goals don’t align with your significant other it can be the cause of a lot of angst. It’s a major source of relationship trouble. Your partner might like to go shopping, like expensive clothes, want a nice car, wants the fancy house etc. None of these will help you achieve your goals if you do them wrong.
The first thing you need to avoid is failing to communicate your financial goals. You both need to be on the same page!
The key I think is to include fun money into your budget. A set amount of money for each of you that you can do what you want with it and not feel bad about spending money that the other person will resent.
5. Consumer debt
Consumer debt is one that gets me worked up. It’s a burden on today’s society! And it’s so easy to get. Credit card debt, store credit, car finance, it’s everywhere and we’re drowning in it!
Avoid getting into consumer debt at all costs. If you want something and can’t afford it now, to bad. You have to save for it. That worked for our parents, why wouldn’t it work for us? And besides, the enjoyment of purchasing something outright is greater than purchasing something and then being burdened with monthly payments for years!
Consumer debt is a dangerous game to play. It becomes a cycle and before you know it all your money has been allocated to paying off items you already purchased.
The sixths financial money pit to avoid is investing. Yes investing, or should I say gambling. See investing is a long term goal, it’s a marathon, not a sprint. You need to avoid looking for short term high gain investments that are highly risky and sometimes don’t even count as investments.
Rather, take a long term view on your investments. Don’t look at investments as a way to get you out of debt, or to get rich quickly. Don’t listen to that friend with a get rich quick investment option. If it sounds too good to be true, it is.
Investing correctly in your thirties will give you decades of compounding interest for your investment to grow.
What you shouldn’t Avoid- In my opinion
I didn’t include travel on my list. I think you should travel as much as you can in your thirties. In my opinion, if you wait until later on in your life you might not be physically able to do all the travel you want to. And there will generally be more and more excuses as to why you shouldn’t travel the older you get. Travel is my spending vice, and I think it is totally worth it.
I’d love to read if you have fallen for any of these money pits, or others that I haven’t thought of. Let me know in the comments!