The average age in Ireland is 37.4, and it’s a time of life when money matters start to get serious. Here’s our top 5 money mistakes to avoid in your 30s.
1. Searching for perfection
Too often we burn up time in search of the perfect solution… and end up doing nothing. With money matters, a step in the right direction is often better than biding your time. That might mean, for example, putting what saving and investing what you can right now, rather than waiting for a big bonus. We need to make good financial decisions, not perfect ones.
2. Not sorting the basics
Your fourth decade is when responsibilities often arrive. So it’s time to sort the basics. That means thinking about what would happen people around you if you couldn’t earn an income, and generating (at least a first cut) financial plan for the future.
The time-critical one is health insurance: if you’re planning on getting it, loading kicks in after age 34. It’s complicated, but in a nutshell, you’ll get hit with an extra 2% cost for every year after age 34 that you didn’t have insurance. (The government wants to encourage us to take out insurance early, and even out costs between young and old people).
It’s also time to think about insurance to replace your income if you can’t work, and your long-term plan for when you stop work.
3. Loss aversion
This is the psychological fact that most people feel the pain of a loss of, say, €500 more than they enjoy the benefit of a gain of the same amount. But if we worry too much about losses, we can run down our wealth over the long term by failing to give it a chance to grow. So we need to resist our instincts a bit.
Most things that are worthwhile involve some risk. In your 30s you’ve got the time and life experience to take some calculated risks.
4. No diversification
The big one here is property. If you own your home, it is almost certainly tying up a lot of your wealth. That’s not bad news… but it’s almost certainly a good reason for your next investment to be non-property related.
Another common way people in their 30s concentrate their wealth is with their employer. If your savings are mostly in shares the company you work for, now might be a good time to start changing the mix.
5. Too much focus on the short term
Don’t spend everything you have. It’s a long game, and your 30s are a great time to begin good long term habits. Doing the right thing now gives your money time to create your future wealth.
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