7 Financial Mistakes to Avoid in Your 30s
Getting your dream job, paying off student debt, purchasing your first house, building a family—whatever your 30s look like, it’s sure to be a lot of change.
This decade is a busy time with tons of moving parts. And it’s a time when you may start being really concerned with getting your financial house in order.
But what does that look like?
I can’t give out personal advice here, but I can point out some major mistakes to avoid. I dedicated episode 60 of The Canadian Money Roadmap podcast to this exact topic—7 financial mistakes to avoid in your 30s.
But, let’s be honest, these don’t just apply to one decade. Whether you’re in your 20s, 40s, 50s, or higher, these are important things to attend to. They’re not just mistakes for a 34-year-old to avoid, they’re mistakes for everyone to avoid.
Ready? Let’s dig in. (Or go listen to the podcast episode to hear it all!).
7 Financial Mistakes to Avoid in Your 30s
1. Not Understanding Debt or Having a Debt Repayment Plan
A lot of people in their 30s have multiple debts. Common ones are student loans, a mortgage, credit cards, lines of credit, or car payments.
Each of these will have a different value amount, interest rates, and payment structures. Step one here is to have a really solid understanding of each of those things. You need to know how much you owe, what the interest is, and what your payments are.
Step two, then, is to have a debt repayment plan. Here are two effective strategies:
Debt Avalanche: This strategy focuses on putting extra money into your debts with the highest interest rates. Say you have an extra $200.00/month above your minimum debt payments—put it towards that which carries the highest interest rate. Then, once that’s paid, put the $200.00 plus the previous minimum to the next highest rate. This allows your debt to become cheaper over time.
Debt Snowball: Instead of focusing on the highest interest rates, focus on what brings the most psychological relief. Carrying multiple debts can be stressful, so this strategy involves paying off the smallest loan first. Once it’s paid, move on to the next smallest. This helps give you momentum and to keep going.
2. Not Taking Advantage of RRSP Matching from Work
This is one of the best ways to boost your retirement portfolio and I’m always shocked by how many people don’t take advantage of it!
RRSP matching is part of many companies’ retirement plans. It’s when you, the employee, contribute some money to your RRSP and your employer matches it.
That part your employer contributes? Free money. Make sure you’re taking it if it’s offered.
Here are two features to know about RRSP matching:
Amount: It’s often calculated by percentage. For example, 2% of your $1,000.00 paycheque is $20.00 that’s paid by both you and your employer—that’s +$40.00 into your RRSP!
Taxes: Your retirement plan typically purchases an asset, such as mutual funds or ETFs. You get these assets without a tax bill because your employer can deposit it into your RRSP pre-tax. This is a perfect way to use an RRSP because you don’t pay tax on it today (you pay when you take it out), and you don’t need the discipline to re-invest your RRSP refund back into your RRSP to make it worth it.
If you’re in a job that offers an RRSP matching plan, take the free money!
3. Not Investing in Your TFSA
Like an RRSP, the TFSA is another vehicle for growing your investments. It’s particularly important to be using your TFSA in your 30s because you have enough time on your side and enough contribution room over your lifetime that this could be your primary account for retirement.
Think of your TFSA as a TFRA—a Tax-Free Retirement Account. Because you can invest in a variety of assets, you can use it as a vehicle for long-term investment. You don’t just need to think of shorter-term savings (i.e., a new car), but can take advantage of long-term compounding and build your retirement fund.
There are two reasons people in their 30s disproportionately benefit from TFSAs:
Time: You have enough time on your side to get the benefit of long-term compounding.
Contribution room: You have enough room to make your account worth a significant amount over the course of your life.
4. Not Having an Emergency Fund
There’s a lot of talk about moving into a recession here in Canada. And one of the biggest things that happens during this time is job loss.
Without a stable income, short-term financial emergencies like a broken appliance, surgery for your pet, or a new car can be really challenging. An emergency fund is a good way to ensure you have what you need, when you need it.
Two things about building an emergency fund:
Start with $1,000 and then try to bring it to about 2-3 months of essential spending (i.e., mortgage or rent, utilities, groceries).
Put it in a savings account so it’s accessible—don’t worry about getting a rate of return on your money, you just want quick access.
5. Keeping Up with the Jones’
Just because your family and friends are doing something—or someone on Instagram is doing something—doesn’t mean you need to.
Whether it’s a vacation you can’t afford, a new wardrobe, or a house, it’s a never-ending battle. You can always get more and spend more, but it will never be enough.
Try to avoid comparison and just focus on the things that truly matter to you and your loved ones. Personal finance is “personal” for a reason—you can’t know anyone else’s real situation, so instead of comparing, just focus on yourself and make the right choices.
6. Focusing on the Wrong Things
When you’re in the early years of your investment life, the small things don’t matter as much. The thing that matters most is your savings rate—how much money you can actually put away.
In your 30s, you’re really at the early stages of your investment life because you’re likely starting to earn more money.
Things like investment fees and returns are important, 100%. But, when your account is small, they don’t make as much of a difference. Your time is better spent figuring out how to make more money and putting it to work for you.
Here’s a rule of thumb: If your account is smaller than your income (i.e., $50K in investments, but you earn $75K), focus your efforts on increasing your account up to the level of your income. Once you’ve invested more than your annual income, you can start looking into some of the smaller things that will maximize your portfolio.
7. Not Having the Right Types of Insurance
Insurance is protection for low-likelihood, high-impact events. So, while you need to have home or car insurance, there are other types of insurance that are important to have.
Here are two to keep on your radar:
Disability Insurance: This covers you if you’re unable to work and is specifically tied to your employment income.
Life insurance: This provides a benefit if you were to die; it’s a way to protect your family members.
These two are just some of many insurance types, but they’re important to get in place. Many workplaces with benefits already offer these as part of the plan, so check and see if you’re covered and how much is covered.
Even if you’re not in your 30s, don’t ignore these money mistakes! Some of them are most impactful when you’re in that decade, but they’re foundational principles for anyone looking to get their financial house in order and build wealth for your future.
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Evan Neufeld is a CERTIFIED FINANCIAL PLANNER® professional in Saskatoon, Saskatchewan and offers both investing and fee-only financial planning services.
*Disclaimer: Any numbers or rates of returns are used for illustration purposes only and should not be taken as fact. Note that the information in this article is current to the time of writing but is not guaranteed as up-to-date past then.
This article and accompanying podcast do not constitute personal financial advice. Evan Neufeld is a CERTIFIED FINANCIAL PLANNER professional in Saskatoon, Saskatchewan, and provides this Canadian personal finance content for educational purposes to the public. You are welcome to contact Evan to receive personalized fee-only financial planning or investment portfolio management.