Your thirties should be one of the most exciting decades of your life, with success at work and on the home front. However, for most Gen Xs (35 – 45) like yourself, how to manage money is a major concern. And this makes sense because, in these tough economic times, you don’t want to find yourself in a situation where you are living from monthly salary to monthly salary or, worse, with debt you can’t repay.
Avoid the following five debt traps and help yourself stay out of financial trouble:
1. Not paying off ‘acceptable’ debt:
Most working individuals have a certain amount of debt – student loan, bond, or car repayments, for example. In order to avoid the penalties that come with non-payment or the effects of compound interest on an existing payment plan, it is important to steadily pay off these debts, either as per the plan or even before if possible and if financially advantageous.
2. Living budget-free:
You will never truly own your lifestyle or know where your debts are coming from if you don’t have a budget. Budgeting might seem like something best left to bored housewives or tight-laced accountants but the opposite is true. If you earn or manage money, you need to budget as it forces you to acknowledge your spending habits and make necessary changes to ensure you have enough money at the end of the month.
3. Playing fast and loose with your credit card:
Credit cards need to be managed properly or they have the potential to become major debt drains. Interest on credit cards tends to be high and accumulates quickly. Spend without care on your credit card and, before you know it, you could be struggling to pay off the interest and never get to the capital amount, damaging your future financial health. Pay off your credit card every month and avoid unnecessary expenses.
4. No investments, insurance, or savings:
How is not having an extra payment to make every month a debt trap? Health care and retirement are expensive concerns that only get more expensive as you get older. Not to mention the damage that can be done to your finances and earning potential by a serious accident. Financially fit individuals secure their financial future with investment and savings products designed to protect and enhance their lifestyles. And, when it comes to investments, insurance, and savings, the sooner you start, the better off you will be.
Don’t know where to start? Speak to a financial adviser who can evaluate your needs and give you expert financial advice.
5. Being financially illiterate:
Perhaps the biggest debt trap for any individual but especially one starting on the path of financial independence is a lack of understanding around financial matters and wealth management. It’s important that you understand how money works in your life and how best to manage it. We can’t be experts in every area of life but it is important to have some basic financial understanding. So start educating yourself or get some expert advice from an adviser who is willing to explain your financial situation and options to you rather than simply telling you what to do. If you already have an adviser, ask yourself if they are doing just that.
Staying out of debt is an important part of a healthy financial plan and every working individual should have such a plan in place. Do you? A reputable financial adviser, one with your best interests at heart, can help you.