Wondering how you can set yourself on the path to financial stability?
As the former head of retirement at JPMorgan Asset Management, I saw many paths to retirement and the crucial steps — or missteps — that people made at each stage of their investment journey.
Here are six key financial mistakes I’ve seen folks in their 30s make, and why you should avoid them:
1. Not having an emergency fund
Having an emergency fund is key to avoid debt later in life, when retirement goals should be front and center.
Ideally, this account should cover three to six months of living expenses so you can ride out any unexpected events such as a job loss or costly medical issues.
It’s wise to put your emergency fund in a savings account, not an investment account, so you can access it immediately and not have to worry about a downturn in the markets affecting how much money you have.
2. Being underinsured
Many people don’t like to buy insurance because it means paying for something they hope to never use.
But the consequences of being uninsured are so large that they can wipe you out financially. One medical emergency or accident on the job, for example, can change your financial trajectory.
The types of insurance that people don’t have to buy, but that I highly recommend, are:
- Term life insurance, to replace your income for a spouse or kids in the case of death.
- Health insurance, to ensure that a major medical bill doesn’t force you into bankruptcy.
- Disability insurance, to ensure that you and your family can maintain your standard of living if you are injured or unable to work.
- Renter’s insurance, if you don’t own your home, so you can replace your belongings in case of theft or damage from a fire, flood or other catastrophe.
3. Making minimum payments on high-interest debt
If you have high-interest rate student loans (at an interest rate above 5.8%), personal loans or credit card debt, I always suggest paying them down as aggressively as possible before you focus on low-interest rate student loans, car loans or a mortgage.
In fact, it might make sense to only make the minimum payments on lower-cost loans until you get rid of the high-cost loans. The faster you can pay those off, the more money you’ll have to put towards other financial goals that become increasingly important as you progress in your 30s.
4. Buying too much house
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