I learned some tough money lessons in my 20s. I had credit card debt that was spiraling out of control. I was making unnecessary purchases. I was definitely not saving money. I learned all of these lessons the hard way. The very hard way.
I recently turned 30, and the next chapter awaits: preparing for the future and shooting to become financially independent. Given the lessons learned over the last decade, I wanted to write down some goals for “things to avoid” in my 30s. Here are some.
The goal for hitting 30 is to have everything on cruise control. We want to have our careers on a smooth path, some us are starting to think about marriage or are already married, many decide to use their disposable income to travel more, and it’s time to start thinking about kids. But, if you’re not careful, things can start to look ugly real quick.
Here are some money mistakes that scare me and I don’t want to make.
Buying A Home That’s Outside My Comfort Zone
Homeownership is exciting, but it gets less exciting when you have all these expenses that come along with it. You have property taxes, homeowners insurance, decorations to furnish your gorgeous home, and repairs that come out of your pocket. About five years ago, I worked in the real estate industry. I saw way too many people get their homes foreclosed on because they had no equity. People were purchasing homes with little to no down payment. Obviously those days are long gone, but the last situation I want to be in is being underwater on my home.
It’s easy to create a maximum budget for a home, but the harder part is sticking with it. How many of you actually went over your budget? When you see a home that’s a lot nicer that’s within your budget, it’s easy to overcommit. A bigger homes means more furniture. More furniture means more money. Oh yeah, did I also mention a higher property taxes? All of these expenses can add up quick!
Goal: Only buy a home that I can feel comfortable affording.
Spending Money On Brand Name Clothes
Hugo Boss, Vince, and Theory were my favorite clothing brands. I know you love my taste, but this came with a price. A hundred bucks for a dress shirt? No thanks. It wasn’t until I did a little spring cleaning a few weeks ago did I realize how much money I was spending on clothes. I set aside everything that I didn’t wear, and did a quick calculation in my head on how much money I spent. It was ridiculous…
I learned this the hard way, and I’m sure I won’t make the same mistake again. Spending money on clothes can be quite costly. I’ll usually find myself at discount stores such as Nordstrom Rack and have a rule not to buy anything that’s not on sale. When I’m trying to decide on whether I want to purchase an item, I usually think to myself, “Do I want to spend $75 on this shirt or should I use the $75 on an airplane ticket to travel somewhere.” This usually works pretty well.
Lately, I’ve had a hard time justifying spending money on clothes and it prevents me from impulsive spending. Clothing styles come and go. Memories don’t, and money doesn’t have to.
Goal: Have 100x more money in my bank account than hanging in my closet.
Not Creating a College Savings Fund
Although this is a little more down the road, I intend to create a college savings fund for my kids. The most common type savings plan is the 529 plan. There’s been some debate on whether this is the right approach, as some of the funds charge high fees. If you take out the money other than for educational needs, you’ll be hit with tax on earnings plus 10%. Regardless of the strategy, it’s better to start early!
Goal: Save $5,000 per year in a 529 plan once the kiddo is here.
Eating Healthier and Becoming More Active
Although this really doesn’t relate to money, it’s definitely something I hope I don’t neglect. In my twenties, I had a tendency to have late night snacks and munch on “drunk food” late at night. As we grow older, our bodies really don’t have the same metabolism. It takes twice the effort to get in shape.
Having a well-balanced lifestyle will make you feel younger and provide you the extra boost of energy to make it through the day. Plus, eating healthier can actually save you money in the long run.
Goal: Stay fit, because it will save me money in the long run!
And last but not least, I hope I don’t fall into credit card debt…
This goes without saying. Using credit cards are a necessary evil. You’ll need it to establish credit history and prove your credit worthiness. I’ve personally seen the struggles of climbing out of debt and it’s something I promised myself never to do it again.
The biggest change that I’ve made to prevent this from happening is to simply think twice about every purchase. I’ve been able to separate my needs versus wants. In doing so, I’m able to finally make the right choices that prevent me from racking up my credit card with no good reason.
Goal: Pay off my credit cards in full every month.
What are some money mistakes you hope you don’t make in your thirties?
This is a guest post from Kevin Yu. He is a Y-Combinator alumnus and loves everything that has to do with FinTech
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