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What is Financial Instability in Your 30s? (What Causes it?)
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What is Financial Instability in Your 30s? (What Causes it?)

Do you have a solid career and a relatively well-paying job but always struggle to make ends meet? You might be experiencing financial instability.

Take the case of David, an HR practitioner. He landed a well-paying job immediately after graduating and has been working for over a decade now. But at 35, David has little savings, no investments, and still lives paycheck to paycheck despite earning slightly over 80k per month. He has mastered the art of wasting money on liabilities and has no control over his finances.

David is unstable because he's always in blind competition with his colleagues and friends. He's obsessed with showing off and would do everything to solicit what he calls "respect" from everyone around him. He's flashy and flamboyant at first glance, but his poor money management skills have put him on a path to instability. If he were to lose his job today, David wouldn't know how to pay the Ksh40,000 rent of his penthouse.

Read Also: How to Achieve and Maintain Strong Financial Health in 2022

What is Financial Instability?

It is the act of not being in charge or control of your personal finances. It happens when you can't maintain a healthy cash flow or lack the financial discipline to create a robust balance between your income and spending.

When experiencing financial instability, you might find it hard to meet your basic needs, save money, invest or accomplish any financial goal you've set for yourself. Financial instability can result from years of poor money management and lack of planning. It can be made worse by a major crisis like loss of income or other financial emergencies.

Read Also: 10 Steps to Reach Financial Stability

Causes of Financial Instability in your 30s

Personal financial instability, more often than, is self-inflicted. It's caused by making one bad decision or an accumulation of wrong decisions over time. In some instances, you might even fail to realise you are leading yourself into instability. By the time your eyes are open, the ship is sinking, and rescuing yourself will need more effort.

Here are seven major causes of financial instability and what you can do to avoid them.

Living Beyond your Means

Living beyond your means entails spending more money than you can afford. You can quickly tell if you're in this category by giving yourself a simple financial checkup and asking yourself these simple questions:

  1. Are you struggling to meet all current financial obligations and saving for future ones despite earning handsomely? 
  2. Do you constantly find yourself prioritising fun over important expenses? 
  3. Are you spending over 30% of your income on housing? 
  4. Are you always making decisions to impress/please those around you? 
  5. Do you have a problem accounting for your income? 
  6. Do you always take short-term loans or salary advances before you receive your salary?

If your answer to any of those six questions was "yes," — you might be living beyond your means and setting yourself up for instability. You need to start taking steps that will take you off that path. Here's what you can do:

Review Your Expenses: By examining how you spend money, you can pinpoint specific categories you are overspending on and make necessary adjustments. Look for what you can cut entirely and find smart ways to save on necessities like housing and food.

Have a Budget: If you didn't know already, a budget is the foundation of financial planning. It will help you spend your income without going overboard and ensure you have enough left to save. For starters, you can embrace the 50/30/20 budgeting rule and use apps to help you track spending. But remember, a budget is useless if you can’t stick to it.

Read Also: 10 Warning Signs You are Living Beyond Your Means

Taking on too Much Debt

Debt is not necessarily a bad thing. As you get well settled in your career and increase your earnings and accumulate assets, you will become prime targets to lenders. Your creditworthiness will be over the roof. But that is never an excuse to take all sorts of credits. 

When you borrow money, you are obligated to repay it. Therefore, your income-to-debt ratio will be affected, and before you know it, you will be spending a significant percentage of your salary on servicing debts. This can affect how much you save and the lifestyle you lead, forcing you to take more debt—putting you in a debt cycle that never ends.

If you must take on debts, go for the good ones—debts that you can afford and those that help you build equity. And if you are already in debt, consider consolidating them and committing to paying them off. This will help you rescue yourself from losing your assets and looming financial instability if you lose control.

Read Also: What Is Debt Consolidation and How It Works in Kenya

Over-relying on One source of Income

It doesn't matter how well-paying your job is; one source of income is risky, especially if you are an employed professional. There are different reasons that could lead to loss of income, from your employer closing up shop, being declared redundant for one reason or another, getting sick or disabled to work or even your skill becoming outdated or automated. 

When any of this happens, and you are no longer making money, you will have to dig into your emergency savings, which can last you only a few months to a year. If you can't find a replacement soon enough, you have to start liquidating by selling assets or opening your fixed account, borrowing from your retirement fund, or taking debts. The results? You became financially unstable.

To avoid all this, start taking simple steps to protect your income and developing new sources of income by:

  • Investing in income protection insurance 
  • Investing in yourself by increasing your skills level and employability status
  • Investing in income-generating vehicles or dividend-paying instruct 
  • Starting a side hustle like freelancing or consulting business 

Read Also: How to Pay Your Bills After Loss of Employment

Not Starting to Invest Early

Right off the bat, the best time to start investing is always yesterday. But it's never too late, and in your 30s, you are reap to start now. Investing is akin to taking risks; after all, there isn't any investment that doesn't carry some risks. 

By starting early, you allow yourself to take more risks and more time to recover from wrong decisions. This helps you learn how to invest and can prevent you from making Investing decisions that can cause financial instability.

Starting to invest early prepares you for emergencies and significant expenses like marriage and starting a family. Without enough money, these expenses can force you to use up all your savings, putting your finances in bad shape. 

Finally, investing early allows you to reap the magical benefits of compounding. You can reinvest your profits, dividends, and interest and generate even more money. And with time on your side, the returns will only be better.

Read Also: Investing for Beginners: How to Get Started 

Having no Financial Goals 

Without financial goals, you can easily lead yourself to instability. Financial goals ensure your current and future needs are protected. Without them, you will spend money without accountability or care. And that can come to haunt you in times of emergencies or when you retire, and suddenly you can support yourself.

The biggest advantage of having financial goals is you develop a healthy spending-saving balance. You'll learn to stay committed to your goals and ensure a portion of your salary goes towards building your portfolios. You will learn to save for big purchases and avoid impulsive financial decisions that can set you back or hinder your growth.

To set financial goals, write down every financial milestone you want to reach and give each of them a timeline. This will help you divide them into short, medium, and long-term goals. Then, prioritise and commit yourself to achieving them within your stipulated period.

Read Also: How to Set & Actually Achieve Your Financial Goals

Failing to Protect Yourself from Uncertainties and Emergencies 

Emergencies and uncertainties are part of life. You can’t escape them. You can take steps to reduce some, but others, you can’t. This is because forces outside your control cause them. And without enough preparation, some emergencies can cause you to lose stability and control over your finances.

Some emergencies can cause you to use up all your savings and force you to take on debts, jeopardizing your future. Recovering from such scenarios is often challenging and takes time. There are two best ways to prevent this from happening:

Emergency Fund: Have enough rainy day funds to cover your expenses for six months to one year. This can come in handy when you have a sudden and hefty bill to sell or when you find yourself in a minor financial crisis.

Adequate Insurance: The best way to prevent yourself from paying huge bills out of pocket is to ensure you have all the vital insurance. Start with buying essential covers like medical insurance, auto insurance, disability insurance, and home/renters insurance. 

Read Also: Easy Steps to Create an Emergency Fund in 100 Days

Ignoring your Risk Tolerance

This takes center stage when making any decision that can affect your financial life. The level of risk you should take and accept will vary depending on different factors that you must consider before making your decision. 

For instance, how you invest for retirement will be different from how you invest in paying off your mortgage loan. Retirement is decades away. You have the freedom to be aggressive. Meanwhile, you must meet your monthly mortgage payments, and you will therefore need to invest in a consecutive way that protects your capital and lowers risk exposure. 

Read Also: 6 Clever Ways to Overcome Your Fears and Take More Risks in Your 30s

Ignoring your risk tolerance can also lead you to be overconfident or terrified when making financial decisions. Decisions that cause you instability or delay your path to financial security. Consider these two investors:

Investor A: She's fearful despite having a high-risk tolerance and capacity that allows her to be aggressive. She is young, high-earner, with little financial responsibility, and has substantial savings. However, she chooses to invest in low-return investments that guarantee her capital will always be protected. 

By ignoring her risk tolerance, she's missing out on the higher returns she'd have made if she had chosen riskier investments. 

Investor B: He's young, has a lot of responsibility, makes less than Investor A, and barely has enough savings. This means he has a low-risk tolerance. However, he invests all his savings in one high-risk investment. If the risk doesn't backfire, he'll make a lot of money.

But because he has ignored his risk tolerance, he stands to lose all his money if the risk does materialise, and with no savings, he will likely experience financial instability. 

Read Also: Scariest Ways to Invest When You Have High-risk Tolerance


One thing you quickly learn as you go into your 30s is the need to put financial instability at bay. There is an urgent need to control your finances and position yourself on a path that will prevent money problems from derailing your financial security goals. 

To be well prepared, you must know what's likely to cause it and then take calculated steps to steer your finances in that direction.

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Farah Nurow is an experienced Content Writer who enjoys writing creative and educative articles meant to provoke readers' thoughts. He loves sunny weather and thick books. You can connect with him on LinkedIn.

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