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| Top 6 Money Traps to Avoid in your 30's |
6 Money Traps to Avoid in your 30's.
6 Money Traps to Avoid in your 30's.
#1 Buying a car out of your price range
#2 Buying a house out of your price range
#3 Spending too much when going out.
#4 Having an expensive significant other.
#5 Paying too many credit card bills.
#6 Not investing.
This type of income is what I like to call “kitchen income”. Now, I am sure you are hearing this term for the first time, and I’m pretty sure you probably won’t find this term in any of your finance courses or even on the internet. So let me explain to you what I mean by “Kitchen income” and why knowing about this could potentially help you avoid money traps in your 30s.
I left you pondering over what “kitchen income” means and how it applies to you. Well, “Kitchen Income” is what you earn by slaving away your hours for someone you are working for. You could argue with me that “slaving away” is a harsh term to use, but I will respond that a 9 to 5 job is just that.
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What you do is that you set a price on yourself and you sell 8 hours or more of your day at the very minimum on that agreed-upon price. Now, don’t get me wrong! I am not saying that it’s a bad thing to do, actually, I highly recommend everyone to get a job, and I will never tell you not to take a job. Every person has different circumstances. Obviously, you are in your 30s with a very young family to take care of, or it could be just yourself, and starting something of your own will take time, money, and patience.While you plan your future and how you will go about it, you cannot neglect the bills and necessary expenses. So, it’s perfectly alright to take up a job to earn that “kitchen income” first. So now, you must have a fairly good idea of what I mean by kitchen income. Basically, it’s an income which you earn to meet your current basic expenses like putting food on the table, renting out a small home, sending your kids to schools, and so on.
Some people might be earning more income from their jobs, so they have more “kitchen income”. Getting to mid-adulthood demands that there is a shift in your priorities. No longer can you say “yes” to just about every part your friends invite you to, nor should you probably be careless with your money either? However, now that you have successfully figured out how to earn your “kitchen income”, it’s time to plan your financial future.
It’s time to start making or acquiring assets that will give you income in the future when you quit or job or retire. Although you might currently have a decent income, now is not the time for you to let your social obligations strip it away. Your goal should be to create assets for yourself which will provide you with future income. How long do you think you can continue earning kitchen income?
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If you are currently in your 30s and in your prime, you might be earning more than your peers. However, this could be because you are working harder and longer than your peers, maybe even for 14 hours a day. But honestly, how long do you think you can continue working that hard in a day? You see, as a person gets older, their ability and capacity to work significantly declines. An average 40-year-old person cannot productively work more than 8 hours a day.
Once you enter into your 50s, that productivity declines to like 6 hours a day. So now that I have your attention, and have maybe gotten some of you worried, the question now is; what should I do? My advice for people in their 30s is that it’s high time you shift your priorities from just making “kitchen income” to “creating an asset” for yourself. The only way for you to do this is to avoid the money traps that you will face in your 30s, and instead, save some of your income and focus it on creating a future asset for yourself. So below are six money traps that you should avoid at all costs.
Learn More Your Money or Your Life: 9 Steps to Transforming Your Relationship with Money and Achieving Financial Independence
Once you enter into your 50s, that productivity declines to like 6 hours a day. So now that I have your attention, and have maybe gotten some of you worried, the question now is; what should I do? My advice for people in their 30s is that it’s high time you shift your priorities from just making “kitchen income” to “creating an asset” for yourself. The only way for you to do this is to avoid the money traps that you will face in your 30s, and instead, save some of your income and focus it on creating a future asset for yourself. So below are six money traps that you should avoid at all costs.
#1 Buying a car out of your price range.
I remember when I got a promotion along with a handsome raise to take up my salary to $10,000 a month, I was ecstatic. Naturally, the first thing that I did was to buy a Mercedes AMG sports car on an installment. I was tired of going around the city in my old Toyota. Yes, I admit, the Mercedes felt great for the first two weeks. The new car smell was something to die for. The praise and approval I got from my family over my first big purchase were great. All of this lasted only for the first two weeks; after which, no one really cared that I owned a Mercedes and I started to question why I had spent over 90 grand on such an expensive car.Learn More Your Money or Your Life: 9 Steps to Transforming Your Relationship with Money and Achieving Financial Independence
It lost 30% of its value in the first year and 50% by the third year. I am not saying that you should never buy an ‘expensive car’ in your life. I have two supercars parked in my garage today, but that is because I can afford it now. It represents less than 0.5% of my net wealth today. I have achieved what they call “financial freedom”. Now, of course, none of that is true, it’s just a dream I’ve had for a long time. But the premise still holds.
A lot of people, especially in their late 20’s and in their 30s spend a lot of money, on an expensive car they can barely afford and will probably need to take it out on an installment. But Why do that? Why do you want to financially strangle yourself due to social obligations? Just because your friends are driving new cars does not mean you need to do the same. If your friends tease you about your Toyota, believe me when I say that it means you need to change your friends and not your car.
Once you get rich enough that buying an expensive car is like going to the grocery store and picking up something, then that is the right time to splurge on an expensive car.
Also, Read 15 Things Rich people never do
#2 Buying a house out of your price range
This is one of the biggest strains on one's monthly income. Although investing in a house can be a very good and practical expense, there will come a point where you will have to face diminishing returns.You see, with a big expensive house comes big monthly payments, unless of course you somehow managed to get a great mortgage with low-interest rates. A big house, out of what you can realistically afford will put you and your family in financial strains. You might not even have any money left for emergencies or for investing, after paying the mortgage. You should explore your local market more and find properties that are selling on a bargain or are what Warren Buffett describes as “value purchases”.
Don’t buy expensive properties as they have already appreciated a lot in value, and thus they probably won’t appreciate much more in value. But instead, look for cheaper properties that still have a lot of potentials to appreciate.
Also, Read 8 skills that will make you a millionaire
#3 Spending too much when going out.
These are the little things that can really dent your savings and your goal of “creating an asset” and “financial freedom”. Once you start earning a decent income in your 30s, you tend to upgrade the restaurants you dine in, the hobbies you indulge in, or even the stores you shop in, this is called lifestyle inflation. And it’s a habit if not can control can seriously get out of hand and lead to problems along the road.Also, Read 9 smart ways to manage your money wisely
#4 Having an expensive significant other.
All of us want to marry that beautiful model walking up and down the ramp of our favorite fashion show. Before you go down on one knee and propose to her, think for a moment. Is it financially viable for you to do so? You might be thinking right now that I am a little insane for mixing love with finances. Well, the rules of the capitalist economy we live in are simple.The glorious and glamorous model wife will have expenses and guess what? You will have to bear them after marriage. Sage advice is to go for a simple girl, who knows and values the same financial goals you aspire to. Try your best to keep her happy with the smaller things in life. Even if you plan on doing something big for her, remind her that it will not be a regular thing.
Even then, remember to stay in your budget. Share your financial position with your wife and keep her involved with the finances of the house. This will empower her to think more about saving money for the future of her kids.
Also, Read 4 Simple but effective rules about money
#5 Paying too many credit card bills.
This is one roller coaster ride you don’t want to take. In this modern age fueled by technology, it’s very easy for you to access your credit card and make payments for things you cannot otherwise afford. It’s also surprisingly simple to max out your spending limits on your current credit cards and apply for new ones and start racking up more debt on that as well. The interest payments on these credit cards alone will keep you poor for the rest of your life and strip away any chance you have at attaining financial freedom.The key to managing your debt is simple – keep your expenses below your income.
The last money trap that you want to avoid is
#6 Not investing.
Like I told you at the start of the post, you cannot become rich in your “kitchen income”. This is the income you earn by slaving away your working hours and just barely managing your lifestyle. Financial advisors; advise people in their 30s is to live on a tight budget, save most of their income, and start investing it in long term assets for yourself and your family. Even if you are earning $400,000 a year, own a supercar, and luxury home, but you end up living hand to mouth and are always waiting for your next paycheck, you cannot call yourself rich.
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Learn to live on a budget, save money for your future, and start investing at a young age. However this doesn’t mean that you can have some fun, you should set aside a certain percentage of your paycheck just for entertaining yourself and family.
To Grow your wealth, Here are 13 best blogs to read to make money online
Credit: Practical Wisdom
Learn to live on a budget, save money for your future, and start investing at a young age. However this doesn’t mean that you can have some fun, you should set aside a certain percentage of your paycheck just for entertaining yourself and family.
To Grow your wealth, Here are 13 best blogs to read to make money online
Conclusion.
Sometimes Earning money becomes easy for us, but to maintain and manage it well becomes tedious.
I think More than 60% of the total population is still going through one of above money traps. But if we want to become financially independent have that ''financial freedom" we have to make a sacrifice of instant gratification.
So, Are you a victim of any of the above money traps?
Which one you are planning to Avoid?
Credit: Practical Wisdom
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