While there are many different financial mistakes that can be made, these financial mistakes are some of the most important. That’s because they impact your daily decisions with money and your financial foundation. Without mastering these, it’s difficult to build wealth and utilize money to improve your life. Avoid these 5 mistakes with financial habits in your 30s and 40s. And remember, it’s the action behind them that counts!
See the transcript below the video if you prefer to read!
Are you making these costly financial mistakes? In this video, I’ll go over the top five financial mistakes to avoid in your 30s and 40s, when it comes to financial habits. These are some of the most critical mistakes I see because they have to do with the bigger picture of how you utilize money in your life. So let’s get started.
Not Having A Clear Plan
Number one, not knowing how much to save or what you’re saving for. Essentially, not having a plan for your money. This is a big deal because it’s hard to make progress with your money when you don’t have a clear picture of what your money is supposed to do for you or how it’s supposed to support your life. When we have ambiguous goals or numbers in mind, our brains are not hardwired to prioritize the goal. It’s important to have a plan if you want to be in the driver’s seat with your money.
One way I see this play out with couples is that they may be saving for different things. Maybe they have different priorities. They’ve never really had the discussion and they’ve never gotten clear on what they’re saving for or even what they want their future to look like. This can cause tension when it comes to finances and how money is spent or saved. This is one of the first steps when it comes to getting your financial house in order.
Not Saving Early Enough
Number two, not saving enough to have the flexibility you want in your future and not starting early. This is another one that I see play out often because it’s easy to get caught up with life when you have young kids. Things are busy and then all of a sudden you’re in your late 40s and 50s and you haven’t really started saving. There are always going to be things vying for your money. That doesn’t just go away, and so you want to start creating that habit now. Don’t wait until your kids are grown to start saving.
Spending All Of Your Raises And Bonuses
Number three, not moderating lifestyle inflation or lifestyle creep. You may have heard of this concept. It means as you get raises, and as you make more and more money, you get used to the inflated lifestyle and you continue to consume all of your income (without adding in or increasing savings).
For example, when you’re 40, your salary is most likely higher than when you first got out of college. If you’re spending everything you make now, that means that you’ve gotten used to the higher income and the inflated lifestyle. That’s fine. You deserve to enjoy your money and you deserve to enjoy the life that you’re living today. But we want to be careful with this and we want to make sure that we build in habits of saving so that eventually we still have a future we love.
Not Improving Your Habits and Biases With Money
Number four, not building good habits and not focusing on financial habits in your life. Essentially, this is just being intentional with your money. It’s important to learn the basics of your finances and to learn about your biases with money. For example, you can’t spend everything you make or you’ll never build wealth. Or you can’t accrue expensive debt and get ahead. If you’re motivated to build wealth, you need to start being intentional with your habits and you need to make good decisions with money.
Not Recognizing That You Have Blind Spots
Number five, not understanding that you don’t know what you don’t know. It’s really important to remember that we all have blind spots and the very definition of a blind spot is that you don’t know when it’s there. You are not aware. And this is why it’s important to work with a financial professional eventually who can show you where you’ve gone wrong. If you make a mistake when you’re 35, you may not understand that you’ve made that mistake until you’re 50, if you don’t have anyone looking from the outside in.
That sums it up! Those are the top five financial mistakes to avoid in your 30s and 40s, when it comes to your financial habits.
