By the time you reach your 30s, it is thought that you are responsible and know how to manage your money. But without a good financial foundation in your 20s, or earlier, it is easy to carry on with the bad spending habits.
Making or breaking money habits can be difficult. Below are 12 money habits to help you make better decisions regarding your money.
1. Not saving early enough for retirement
Ideally you should start saving for retirement from your first paycheque, but many people delay this until they have a higher income.
“Regular career changes, coupled with property and vehicle repayment commitments, provides thirty-somethings with easy justification to delay funding for their retirement until they have more surplus income to spare,” says Craig Torr, director at Crue Invest.
Many also delay saving for retirement to pay for current expenses. But by delaying your retirement savings, you are losing out on the benefits of compound interest, which can help you build your retirement savings nicely. According to Sanlam Employee Benefits, for every five years of work, you should have one year’s annual salary saved. If you start working at 20 and retire at 65, that is 40 years of work, and should equate to 12 years’ worth of annual salaries saved.
Further reading: How much will you need in retirement?
Many people fail to preserve their retirement savings when switching jobs. Unlike their parents and grandparents, most people in their 30s will change jobs often throughout their working life. Each time you change jobs, you will gain access to the retirement savings you accumulated while at that job.
“Millennials enjoy a longer life expectancy than any other generation prior to them, and could realistically spend 35 to 40 years in retirement. Regular career and job changes will tempt millennials to withdraw their retirement fund benefits rather than preserve their capital,” says Torr.
Further reading: Why preservation is important for retirement
Many parents often feel the need to prioritise their children’s education over their retirement savings, as it is seen as a more immediate and important expense.
However, failure to save towards your retirement now, could lead to you relying on your children for financial support in the future, when they may need to prioritise their children’s education and retirement savings.
4. Taking on too much debt
In a world where we want something and we need to have it now, it is easy to fall into the debt trap.
“Knowing their income will increase quite rapidly in the medium-term, young professionals often over-extend themselves with home and vehicle debt. Statistics show that car owners in their 30s and 40s tend to have the highest level of vehicle debt. Debt keeps the buyer on a debt treadmill, paying off yesterday’s expenses with interest,” reveals Torr.
Handy tip: If debt is something you are struggling with, debt counselling might be the solution for you.
5. Spending too much on your wedding
In your 30s you may feel that it is time to settle down and get married. While you may have more disposable income in your 30s compared to your 20s, it is still important to be smart when planning a wedding.
“In their 30’s, couples often cover wedding costs themselves rather than burden their parents who may be short-funded for retirement. The average cost of a wedding in South Africa ranges between R70 000 and R150 000 depending on the number of guests. The total continues to tally, when adding the honeymoon at an average of R30 000 and R25 000 on the rings,” states Torr.
He elaborated: “Borrowing R70 000 at an interest rate of 18% to fund their wedding, and paying this debt back over five years, a couple would effectively spend R106 652 on their wedding. Starting out life together saddled with debt can create enormous tension within the relationship.”
Further reading: How to plan your dream wedding on a budget
Money can be a sensitive topic and something that people may avoid talking about. However, when you are in a relationship, it is important that you both have an understanding of your financial goals and how you manage your money.
Further reading: When should you talk about money in your relationship?
In your 30s you may have acquired a number of assets, a house or car. These items can be expensive to repair or replace if something happens. Rather than skimping on the insurance to cover other expenses or wants, this should be something that is prioritised to ensure that you and your family are not left in the lurch should something happen.
In addition to insuring your belongings, it is also important to insure yourself. Your ability to earn an income is your biggest asset, as without that you may have no means of supporting yourself or your family.
8. Avoiding risky investments
It is easy to be cautious when investing over fear of losing your investment. However, when you are younger you can (and should) take more risks with your investments. In many instances the high the risk associated with the investment, the higher the return.
“If you begin investing at the outset of your career, you have a very long investment timeline and should not be too conservative in your long-term investing,” says Torr.
9. Not having an up-to-date and relevant will
“Dying intestate, or without a will, is not ideal because it means that certain unintended beneficiaries may inherit from your estate. The Master of the High Court will appoint a curator to take care of your estate, and any assets left to your minor children will go to the Guardians Fund where they will be administered by state authorities until your children are old enough to inherit. The state will also appoint a guardian to take care of your children, and it may not be the person you would have chosen,” explains Torr.
Further reading: Estate planning for new parents
By getting your whole family involved in your monthly budget, it will ensure that everyone has at least a basic understanding of the family finances, and help you avoid unnecessary expenses. While your children may not want to hear that you can’t afford to buy them the latest toy, if you explain what your money is going towards, their schooling, food, their home etc., they may be more understanding.
11. Planning for expected and unforeseen expenses
Put aside a set amount into a special savings account or cheque account for emergency expenses. These expenses could be for anything from paying a plumber if your geyser bursts, to paying for car repairs or medical emergencies. Having an emergency fund will help to alleviate the financial pressure you may experience if you haven’t plan for emergency expenses.
Further reading: Where should you keep your emergency savings?
With tax season upon us, now is the time to think carefully about how you will spend any tax refund you may receive. While it might be a nice idea to spoil yourself and purchasing that one item you have had your eye on, or go on holiday, why not invest it into your retirement savings?
Essentially this is money you didn’t have before and it shouldn’t be something that you rely on, as you are not guaranteed a tax refund. As such you shouldn’t miss it if you invest the full amount. Investing your tax refund will boost your retirement savings.
Further reading: 10 Ways to spend your tax refund