It is important to start building wealth through investing early to make the most of compounding returns. Below are some common mistakes to avoid in your 30s to ensure success in reaching your financial aspirations.
Racking up debt
A great way to sabotage your own efforts toward building financial security is to be carrying a lot of debt, especially those from credit cards and personal loans. After all, the stock market’s average annual return over long periods is close to 10%, which is great, but many credit cards are charging 16%, 20%, or even 25% or more annually. Even if you invest regularly, holding excessive debt may result in you going backwards with your financial goals.
Not having an emergency fund
Not having an emergency fund is an emergency in itself. It is easy to assume you won’t lose your job, face costly medical bills, or need unexpected repairs on your car, but these things happen to people all the time – often out of the blue. Aim to have at least several months of living expenses in an accessible account, so you are prepared for any expensive curveballs life throws at you. Furthermore, ensure sufficient risk management provisions are in place such as life, car and health insurance. This will cushion the one off expense if the worst was to happen.
Not living below your means
It is smart to develop good habits early in life, and one of them is living below your means. That means spending less than you earn. It sounds simple, however, in practice, many fall into the trap of purchasing a bigger house or fancier car than what is realistically and practically required. Staying within your means ensures that you do not rack up on unnecessary debt and will be able to save and invest your ongoing cash flow surplus.
Taking on too much risk
Investing in stocks is a powerful long-term strategy, but do not just invest in any stocks at any price. Do not fall for the hype around penny stocks and don’t chase growth stocks at high prices. It is important to ascertain your own risk appetite before investing to avoid emotions taking over. If stock picking is out of your realm of expertise, seek assistance from a financial adviser.
Not having a plan
Finally, here is a big blunder that too many people make, not having a plan. It is great to be saving and investing, but are you saving and investing enough, too little or too much? How much more should you be aiming to invest in the coming years? How much money do you need to retire? Do you want to try to retire early? If so, how will you achieve that goal?
Take some time to create a plan, and do not be afraid to consult one of our experienced financial advisers.
Please note this article provides general advice only and has not taken your personal, business or financial circumstances into consideration. If you would like more tailored advice, please contact us today.