11 Common Money Mistakes People Make in Their 30s

How you handle money and make financial decisions can impact you and your loved ones in many ways. It is essential to develop good financial habits early.

As part of our Intergenerational Family Wealth Planning offering, we are writing a series of articles focused on the most common financial mistakes people make in different decades of their lives.

Today, we discuss the mistakes people make in their 30s and provide some tips on how you can set yourself up for financial success.


Our 30s are one of the more transformative decades of our lives. As we mature, responsibility takes center stage. Jobs become careers. Apartments become houses. Relationships become families. Dreams become goals. This is the age when healthy financial habits can have a positive and long-lasting impact on your financial future. It is also when financial mistakes can derail your long-term financial well-being.

Mistake #1: Trying to Compete

One of the most common mistakes younger people make is social comparison bias, also known as “keeping up with the Joneses.” Comparing yourself to others, whether it be family members or peers, may lead you to want things before you can afford them.

You probably do not remember what your parents sacrificed to get to where they are today. Trying to match their lifestyle, when you are so much earlier in your career and savings plan, is unrealistic. Comparing yourself and your assets to your peers are equally dangerous. Not everyone has the same financial obligations or the same income (which can consist of salary, bonuses, and even trusts). Not recognizing these differences can lead to overspending and living beyond your means.

This is your journey. Enjoy it. And have faith that what you want can eventually be achieved with responsible planning. 

Mistake #2:  Not Having a Budget

No matter your age, knowing how much you spend and what you spend your money on is essential. You cannot make important life decisions such as how much house you can purchase, what kind of car you can afford, or how fancy of a vacation you can take, without knowing where you stand. Creating a budget (and abiding by it) can mean the difference between achieving your long-term goals or falling far into debt. 

You can obtain the information you need from your bank statement, checkbook, and credit card statements. Your budget can be tracked in many ways, ranging from a simple Excel spreadsheet to applications such as Quicken, Mint.com, and NerdWallet.com.

Here are a few tips to help you create your first budget:

  • Record the cash inflows you can rely on (i.e., your net salary – not gross). Bonuses are not typically guaranteed, and therefore should not be factored into your budget until received.
  • Track all your expenses, those that are required (e.g., mortgage/rent and utilities), and those that are discretionary (e.g., dining out, entertainment, and clothing).
  • Review your actual expenses compared to your budget on a monthly (or at least quarterly) basis. If your expenses are exceeding your income, reassess.

Mistake #3: Not Having an Emergency Fund

Not having an emergency fund can be financially catastrophic should the unexpected happen, such as unemployment, illness, injury, or a large unanticipated expense. Protect yourself by setting up a savings account specifically for emergencies. If you cannot fund it right away (and most people cannot), then set up an automatic sweep from your checking account. This fund should always contain enough money to cover at least six months of expenses. And remember, as your expenses grow, so should your emergency fund.

Mistake #4: Overspending on a Home or Other Purchase

In your 30s, you are likely to purchase a home, and possibly upgrade to a luxury car. It is important to remember that the more expensive these assets are, the more expensive the upkeep is (i.e., insurance, utilities, repairs, maintenance, and furnishings). Overspending on these things could cause a spiral of increasing debt as well as limiting your ability to save. Here is a good rule of thumb: Do not spend more than 28% of your income on housing expenses, and no more than 36% of your income on total debt.

Mistake #5: Carrying Too Much High-Interest Debt

You incur consumer debt when you purchase goods or services using credit cards. Credit cards are easy to come by and simple to use, thus making it easy for people to spend in excess. It is easy to lose track of how much you dine out or shop.

Credit cards also permit you to make minimum monthly payments, rather than paying off the entire balance at once. This benefit, however, is not free. Many people do not even realize the interest rate they are paying. It might shock you to discover that your $1,000 purchase became a $1,180 expense (or more) because you didn’t pay it off in full. Those numbers quickly add up if you are unable to pay your bill each month. And non-payment carries the additional consequence of negatively impacting your credit.

The answer is simple. Pay off your credit card debt every month, and if you can’t, you need to address your spending habits. If you have already incurred debt, put together a plan to pay down the credit card with the highest interest rate first until your debt is paid off. Another option is to consolidate your debt to a no-interest credit card, giving you some time to pay down the balance. Finally, create a budget (as discussed in mistake #2).

Mistake #6:  Investing Too Conservatively

Whether you are just starting to invest or adding to your investment portfolio, remember that you are investing for the long-term. You have about 30 years until retirement and then another 20-30 years to live in retirement. You can’t afford to be too conservative now because inflation will erode your purchasing power of time.

Consider your time horizon, which represents when you will need the funds. Be more conservative with funds that are required for short-term purchases (such as a home), and more aggressive with assets with longer time horizons (such as those held in retirement accounts).

Your risk tolerance is dictated by how much volatility you can withstand. This helps to set the diversification (asset mix) in your investment portfolio. For example, equity investments (stocks) are generally more risky investments than fixed-income investments (cash and bonds). Equities also tend to generate higher positive returns than their fixed-income counterparts over the long-term. Equities are needed in a portfolio if you are looking to beat inflation over the long-term and maintain your purchasing power.

By way of example, over the long-term, the S&P 500 averages an annual rate of return of more than 8-10%. Fixed income products (bonds and cash) average a 3-4% rate of return over the same period. Therefore, a balanced portfolio of 60% equity investments and 40% fixed-income investments can be expected to earn a blended return of between 6-7%. 

Your long-time horizon allows you to ride out stock market volatility. There has never been a 20-year period in the market where stocks have generated a negative return. So do not overreact to current market conditions. Never let emotions dictate your investment decisions in the short-term and do not try to time the market. These are recipes for the underperformance of your portfolio.

Mistake #7:  Not Having the Financial Discussion

Most people would rather talk about anything other than money, and failure to agree on how to handle finances is a significant contributor to relationship conflict. It is important to understand how each of you views money. While there is no right or wrong answer, open communication is the key to a healthy relationship and an achievable financial plan. Discuss your feelings about these topics and more:

  • Do you prefer separate or joint bank accounts?
  • Are you comfortable incurring debt, or do you prefer to live debt-free?
  • What is your investment risk tolerance?
  • Are you a saver or a spender?

Meeting with a certified financial planner and developing a comprehensive financial plan is a sound basis for this discussion, as the planner can act as a mediator in the conversation. 

Mistake #8:  Not Saving for Retirement Early Enough

Retirement is never as far away as it seems. The earlier you start saving, the more the power of compound interest can benefit you.

For example, compound interest of 5% on $100,000 would earn you $5,000 in year 1, $5,250 in year 2, and nearly $8,000 in year 10. That’s more than $62,000 in interest over ten years! Now extrapolate that over your 30-year working period, and the benefits of saving for retirement early become clear (even if you only begin with small amounts).

We recommend contributing a percentage of your pre-tax income to an employer-sponsored retirement plan (i.e, a 401(k) or 403(b) plan) if available. Note that we say percentage here, rather than a specific amount. This way, your contributions automatically increase when you receive a raise.

If you do not have access to an employer-sponsored plan, consider opening an individual retirement account (i.e, a Traditional, Roth, SIMPLE, or SEP IRA).

The bottom line is that you need a formal and automated way to save for retirement so that it doesn’t get pushed to the back burner.

Mistake #9: Not Maintaining a Strong Credit Score

It’s probably no surprise to you that a strong credit rating gives you access to more credit at a better rate. The fastest way to build strong credit is to use your credit (i.e., charge your expenses), and then pay it off immediately. This establishes a good history. Conversely, failing to make timely payments on loans can quickly drop your score, resulting in higher interest rates and insurance costs.

Everyone is entitled to one free copy of their credit report every 12 months from each of the three nationwide credit reporting companies. You can order them online at www.annualcreditreport.com. To maximize this benefit, we recommend requesting a report from a different agency every four months. This strategy allows you to keep better tabs on activity throughout the year. Should you find a mistake (and it does happen), take steps to rectify it immediately.

It is worth noting that the FICO System is due to change this year. We discuss these changes in our article, “Change in FICO System Could Affect Your Credit Score.”

Mistake #10: Not Having the Right Insurance

Insurance is something we pay for and hope we never need. Thus, it is sometimes viewed as a luxury or even a nuisance. But it’s an important part of every financial plan, especially when there are people in our lives we wish to protect.

Property & Casualty (P&C) Insurance is a smart investment that protects you and your family in the event of an unforeseen accident in your home, auto, or on your property. It transfers the risk from you to the insurance company. These policies can be more complicated than you might expect, so it’s important to understand what your policy covers, and where you may be exposed.

P&C Insurance includes three main areas: Homeowners/Renters Insurance, Auto Insurance, and Liability Insurance. You can learn more about these by reading our two-part series on Property and Casualty Insurance: An Often-Overlooked Part of One’s Financial Plan and  How the Auto and Liability Insurances You Select Can Impact Your Financial Plan.

Also, once you start a family, purchase life insurance. This will protect your loved ones should you become incapacitated or die. Your employer may offer life insurance, or you can buy it privately and it will remain with you for the term. How much life insurance you need can be difficult to pinpoint. We recommend speaking with your financial planner or an insurance professional to ensure you purchase the appropriate amount.

Mistake #11:  Not Investing in Yourself

Do you want to start a business?  Do you eventually want to own a second home? What type of vacations do you want to take? Think about the lifestyle you want to have now, in the future, and yes, even during retirement. How do you plan on achieving each of these things?

These are a few of the areas a comprehensive financial plan will help you address. Having a formal plan can prevent you from making the mistakes we discussed above. When you work with a CERTIFIED FINANCIAL PLANNER™ professional, you get a personal steward, a professional who will act in a fiduciary role on your behalf. Do not consider this an expense, but rather an intelligent investment in yourself and your future.


One’s 30s are a time when most start taking their journey to financial independence more seriously. Establishing and achieving goals, having tough financial conversations early, and developing a formal savings plan are all outcomes from developing a sound, comprehensive financial plan. Avoid the pitfalls we discussed above that can derail you from achieving financial independence.

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