Skip to Main Content

6 Financial Mistakes to avoid in your 30s to Improve Your Personal Finance

If you are in your 30s, you should follow comprehensive financial planning involving emergency funds, insurance, goal planning, tax planning, estate planning, budgeting, etc. To help you plan better, we will discuss 6 financial mistakes to avoid in your 30s to improve your personal finances.
6 financial mistakes to avoid in your 30s

Many of you must be in your 30s currently. In this age bracket, an individual would have settled in their career, married, started a family, bought a house, etc. It is a good time to reflect on your personal finances and evaluate the progress made so far, and also chart out the way forward. In this article, we will discuss 6 financial mistakes to avoid in your 30s to improve your personal finances.

1. Not having an emergency fund in place.

  • Every individual should take a comprehensive financial planning approach. The first step for this is to build and maintain an emergency fund. If you are in your 30s and still don't have an emergency fund, it is time to put one in place immediately. If you have an emergency fund, you should review whether it is adequate.
  • An emergency fund is required to get through any unplanned or unexpected financial contingencies. An emergency fund is useful in the following scenarios:
    1. An individual has lost their job, and it is taking time to find another job
    2. An individual is transitioning between two jobs. They might be serving their notice period, which can be from one to three months. Some employers don’t pay salary during the notice period and pay during full and final settlement.
    3. An individual is in an industry with pay cuts, salary delays, etc. During the Covid-19 pandemic, many individuals working in the airline, hotel, multiplex industry, etc., faced pay cuts, salary delays, or job losses altogether.
    4. An individual or a family member is hospitalised for an event that is not covered in their health insurance policy.
  • Ideally, the amount to be maintained in an emergency fund should be equivalent to 3 to 6 months of income for an individual working in a company with good cash flows in a stable industry. However, if an individual is self-employed and has lumpy cash flows, they may maintain an emergency fund with 6 to 9 months' income. Similarly, for an individual working in a company with financial issues or in an industry facing turbulent times, the emergency fund should be equivalent to 6 to 9 months of income.
  • Key takeaway: If you are in your 30s and still don’t have an emergency fund, you should put one in place right now.

2. Not having adequate term insurance for self and health insurance for the entire family.

  • An individual needs to have life insurance for himself/herself and health insurance for the entire family.
  • Life insurance can pay for an individual’s financial liabilities (home loan and other loans) and financial responsibilities (child’s higher education and marriage, spouse’s retirement, etc.) in the event of untimely death. 
  • You should have an adequate amount of health insurance for the entire family. You may have health insurance from your employer, which is good. But it is better to have your own family floater health insurance for the entire family. The existing employer can reduce or withdraw the health insurance cover anytime. When you change your job, the new employer may or may not provide health insurance coverage.
  • Key takeaway: If you are in your 30s and have still not bought life insurance, buy a term insurance cover immediately. Similarly, if you don’t have health insurance for your family, buy a family floater health insurance cover immediately.

3. Not doing retirement planning

  • Many individuals in their 30s feel now is the time to enjoy life and not bother about retirement planning. Well, you should start doing retirement planning, ideally, from the time you start earning. The sooner you start, the less you will have to invest, and the more you will benefit from the power of compounding in the long run. 
  • For example, three individuals; aged 30, 40, and 50 years start investing Rs. 1,20,000 annually (Rs. 10,000 per month) in an equity mutual fund scheme. They will invest till their retirement (age 60 years), and are expecting a return of 12% CAGR. Their retirement corpus will look like this:
AgeInvestment time horizonAnnual investmentExpected rate of returnRetirement corpus
30 years30 yearsRs. 1,20,00012% CAGRRs. 3.24 crores
40 years20 yearsRs. 1,20,00012% CAGRRs. 96.83 lakhs
50 years10 yearsRs. 1,20,00012% CAGRRs. 23.58 lakhs
  • As seen in the above table:
    1. The 50-year-old guy will accumulate only Rs. 23.58 lakhs.
    2. The 40-year-old guy will accumulate Rs. 96.83 lakhs, which is more than 4 times the 50-year-old guy.
    3. The 30-year-old guy will accumulate Rs. 3.24 crores, which is more than 13 times the 50-year-old guy.
  • Key takeaway: Don’t postpone your retirement planning until it’s too late. If you are in your 30s and haven’t started retirement planning, then do it now.

4. Not doing goal-based planning

  • Many individuals make ad-hoc investments in mutual fund schemes. These investments are not mapped to any specific financial goals. It is not the ideal way of investing. If you are in your 30s and are following a similar approach toward investing, it is time to change to goal-based planning.
  • Goal-based planning helps you to:
    1. Identify your financial goals, quantify them, and prioritise them
    2. Make a goal plan for each financial goal based on the amount required, investment time horizon, risk profile, etc.
    3. Make appropriate asset allocation to various asset classes such as equity mutual funds, fixed income, gold, real estate, etc.
    4. Review the goal regularly, and make appropriate changes, if required, till the goal is achieved.
  • Key takeaway: If you are in your 30s, map your investments to your financial goals. You should ideally follow comprehensive financial planning that involves a combination of an emergency fund, insurance, goal planning, tax planning, estate planning, budgeting, etc.

5. Not following budgeting

  • In the previous section, we discussed that budgeting is one of the components of comprehensive financial planning. If you are not following budgeting, most likely, you must be running out of money before the month-end. You must be scratching your head, wondering where you spent the entire monthly income.
  • Budgeting is the process of documenting all income from various sources, expenses (discretionary and non-discretionary), investments, etc. It helps allocate income towards various expenses and investments. There are various methods of budgeting that you can follow.
  • If you are new to budgeting, you can start with the 50:30:20 method of budgeting. It allocates your income as follows:
    1. 50% towards needs,
    2. 30% towards wants, and
    3. 20% towards savings and investments 
  • Once you get comfortable with the 50:30:20 method of budgeting, over a period of time, you should shift to the Pay Yourself First budgeting method. It first allocates income to savings and investments, and then the remaining amount is allocated to expenses. With the Pay Yourself First method of budgeting, the probability of you achieving all your financial goals is very high.
  • Key takeaway: If you are in your 30s and still not the following budgeting, it is time to start with the 50:30:20 budgeting method. Over time, you should shift to the Pay Yourself First budgeting method.

6. Not repaying the entire credit card outstanding

  • Credit cards offer many benefits like free credit of up to 50 days, building a good credit score, reward points, and other benefits. However, all these benefits are worth only if you pay the entire monthly bill before the due date. You incur heavy charges if you are carrying forward the outstanding balance by paying the minimum or any amount less than the 100% outstanding. These include interest charges of up to 45% p.a. If you default on the repayment, your credit score will be impacted negatively, and you will find it difficult to get loans in future.
  • Key takeaway: You should use credit cards to maximise their benefits and repay the entire monthly amount on or before the due date.

It is all about healthy financial habits.

In the above sections, we discussed the financial mistakes you should avoid in your 30s. When you avoid these financial mistakes and embrace healthy financial habits, the probability of achieving financial goals is high. When you take the comprehensive financial planning approach, you can systematically plan and achieve your financial goals.

Investing in mutual funds with the Glide Invest App

In this blog, we have understood the 6 financial mistakes to avoid in your 30s to improve your personal finances. You can partner with the Glide Invest App for your financial planning journey to get recommendations for the appropriate mutual fund schemes based on your risk profile. You will get advice on planning and systematically investing towards your financial goals

With Glide Invest, you will get guidance for:

  1. A personalised risk profile assessment
  2. Identifying your financial goals
  3. Appropriate asset allocation
  4. Making a financial plan for each goal
  5. Automating the financial plan
  6. Review and analysis of your financial plan 
  7. Hand holding you till your financial goals are achieved

To start investing towards your financial goals, download the Glide Invest App from Google Play Store or Apple App Store and get started.

Click to start searching
Recent Posts
Multi-asset allocation mutual funds: Should you invest in one scheme instead of three?
7 minsSeptember 30, 2022
Rich Dad’s Cashflow Quadrant Book Review
11 minsSeptember 27, 2022
Money frauds Online: More and More People keep falling Prey
6 minsSeptember 23, 2022
World Rowing Championship 2022: Different Investing Lessons the Sport Offers
7 minsSeptember 20, 2022
How does the core and satellite investment portfolio approach work?
7 minsSeptember 16, 2022
Posts by Categories
International Investing (3)
Glide Portfolio (3)
Tech (3)
Passive Investing (7)
Goal Planning (9)
Investment basics (10)
All Stash! (10)

Like What You See? Want to learn the simple ways to make investment stress-free?

Sign up for our newsletter & get the best expert advice & news around the financial world

We won’t annoy you more than once a week, Pinky Promise!

Multi-asset allocation mutual funds: Should you invest in one scheme instead of three?

Learn about multi-asset mutual funds and where to invest them? Learn more about multi-asset mutual funds, benefits, limitation & performance.

Rich Dad’s Cashflow Quadrant Book Review

The Cashflow Quadrant book by Rich Dad provides all the information needed to achieve financial freedom and achieve your income goals.

Money frauds Online: More and More People keep falling Prey

India and its heartland are full of bizarre stories. On the one hand, it is rich in culture and on the other, it also floats with reports of frauds and scams. People were taken by storm...