Financial decisions to consider before turning 30

Frank Magwegwe - Segment CEO: Momentum Retail.

Recently I found myself reminiscing about all the financial decisions I had to consider before turning 30 and the pressure one feels as the big 3-0 approaches, to make sound financial decisions, because life was just too short to fumble with my financial future.

Now in my mid 40s I realise this statement could not be further from the truth, instead it became a justification to buy compulsively rather than saving and waiting (like I did with my first car) and also became a vivid sign of my impatience with the snail’s pace movement my career was taking. 

This lack of patience was good for one thing, it led me to leave the corporate world at 29 to start my own business. 

Looking back now, ten years later, I appreciate that life is not short at all, in fact a thirty year old discussing a short life may be looking at another 50 long years of living! 

But it is understandable for a 30 year old to start seeing life as being short. Most people first enter the job market in their early to mid-20s. They start off earning an income with very little financial obligation. No mortgage payments and no kids! Some, like me, were even fortunate enough to get study bursaries eliminating student loans as well. 

However like a lot of South Africans, we often have the obligation to support extended family, especially if you are the first in the family to attain a university education and get a good job at a ‘big company’. So although life was relatively easier in our 20s, income still had a lot of demand on it and as we approach 30 the prospects of the rest of our lives start to become very real. 

As a certified financial planner I constantly remind people under 30 that they are in the ‘accumulation phase’ of their life, where they accumulate valuable assets for the future: skills and experience for their career, first car, home and more importantly laying the foundation for their financial future. 

This foundation requires good decision making skills looking well into the future as many financial decisions made before turning 30 can have long lasting impact on our lives. 

Therefore financial decisions need to be carefully considered - but what are some of these decisions? 

• Track your spending. Understand what is earned and what and how much is spent. Many people struggle during retirement because they did not develop this habit
• Find a qualified financial adviser to partner with. Take advantage of their expertise to set goals and develop plans to achieve these goals.
• Recognise your key assets. Skills, knowledge and experience are the biggest assets you have and the key lever in achieving your financial goals. Pursue personal growth and learning. This protects and improves your income earning potential
• Understand retirement and group life benefits offered by employer. Start to contribute the maximum allowable to your employer-sponsored retirement savings. In this way, you will benefit the most from the power of compound interest.
• Set goals to become financially literate. Research has shown that people who are financially literate hold more financial assets and end up with more wealth than those who are not. Invest time and effort to become knowledgeable in personal finance.
• Acquire life insurance cover. If there is anyone who depends on you financially protect them by acquiring life cover and ensure a valid will is in place. 

As my mind gradually reminded that I am now well over 30, a final thought crossed my mind. 

There are other life decisions to make before turning 30 that often shape your financial decisions including your choice in partner, when you are going to have kids and your career path. So think carefully and remember that although life may be long, making smart financial decisions will make the journey enjoyable.