When you’re young, establishing a solid financial foundation is important — but not necessarily at the forefront of most twenty-somethings priority list. As long as you have enough to cover rent, a few bills, and some fun on the weekends — everything is a-okay.
But something changes once you hit the big 3-0.
Besides the fact that you’re older (and hopefully wiser), there’s just something about crossing that threshold that creates a sense of urgency to get serious about your money. Sure, you’re still balancing student loans, a host of other debt, and increased home/work responsibilities — but overall things are headed in the right direction.
For the first time in your adult life, you probably feel like you can get on the right track financially.
And you can, but it all starts with having a plan.
The good news? Creating a plan to win with money in your 30s doesn’t need to be a complicated process — in fact, it’s probably a lot easier than you think.
Determine Your Direction
Want to know the most common reason people in their 30s suffer financially?
It’s generally due to exhibiting the wrong financial behaviors.
Put a different way, they aren’t 100% clear on what they want their lives to look like, so they end up mirroring the (bad) financial habits of those around them in an effort to maintain an equal status among their peers.
But here’s the thing, in your 30s many of your peers are just trying to figure it out too!
Ever hear about the blind leading the blind? Yeah, that applies here.
That’s why before you budget a single cent or plan to pay down that first debt, it’s important that you spend time clarifying your goals. Think about the life you want 5 to 10 years from now and reverse engineer to determine the steps you need to take now in order to get there.
Once you’re clear about your direction, take inventory of your income and spending habits and see if they are aligned with those goals.
Create a Budget
Ah, the budget. For some, it’s the roadmap to wealth creation, for others, it’s the dreaded ‘B’ word. But even if you fall in the category of the latter, there’s no arguing that having a budget is an important step in making informed decisions about your money.
To put it into context, let’s say you’re building a house and had interviewed architects. Chances are, you wouldn’t hire the person that said “I don’t really use drawings. I’ve built hundreds of houses before and can promise you that I’ll put everything in the right place.”
You would insist on seeing some type of drawing to outline what was going where.
As the architect of your financial house, you should operate in the same way.
Build an Emergency Fund
It’s safe to say you probably have a lot more responsibility today than you did just a few years ago. A spouse, kids, mortgage, cars, etc. are just a few of the many things that fall under your responsibility to care for and protect.
While an emergency fund won’t take any of the responsibility off your hands, it will help you sleep better at night knowing that in a worst-case scenario where you lose your job, you’re able to keep paying bills until you find another source of income.
If you have little-to-no savings at the moment, set a goal to get your account to at least $1,000 over the next several months. This amount should help you overcome an average-size financial emergency (i.e., unexpected car repairs, home maintenance, and medical expenses).
But that, of course, is just a starting point.
Most financial experts suggest that a sufficient emergency fund should have enough money to cover three to six months of expenses.
While that may sound like a tough hurdle to overcome especially if you’re just getting started, setting up automatic withdrawals from your checking account to your savings account can jumpstart the process and keep things on autopilot as your build up your balance.
If you’re like most people around your age, you took on a significant amount of debt during your 20s. Now that you’re in your 30s and there’s a lot more at stake, your focus should be on eliminating that debt as soon as possible.
One of the most popular ways of doing this is known as the “Snowball Method”. This is a debt repayment process that starts with paying down the smallest outstanding debt and working up to the larger ones.
The rationale with this method of debt repayment is with each debt you pay off, you begin to feel a sense of relief. Above that, you’ll also begin to free up cash that can then be “snowballed” into other debts.
Increase Your Retirement Contributions
By the time you’ve reached your 30s, you should have already started contributing to a 401k plan (or similar offering), but now its time to kick things into high gear.
For starters, you should be contributing enough to receive the full employer match (if offered by your company) — otherwise, you’re missing out on (essentially) free money.
Next, you’ll want to create the habit of increasing your contributions on a regular basis, either annually when you get a bonus or raise, or an arbitrary period (i.e., every six months).
Many employers offer the ability to automatically increase the percentage of your contributions on a predetermined basis. This is a great option for those that may not remember to increase contributions or those on the fence about setting aside more money for retirement.
Create a Trust
Gloomy as it may be to consider, our time here on earth is finite. Deep down we all know this but seldom is that knowledge enough to take action on planning for after we’re gone.
Instead, many of us view estate planning as something that only is seniors should be concerned with.
The truth is, for every adult with a spouse, child, home, or business, it’s important that you have a trust in place. This agreement is critical to your life planning and well-being because it outlines exactly how to handle your assets in the event of the unexpected.
While DIY-options are available, when considering a trust I recommend seeking the professional advice of an estate attorney to make sure you’re making the right decision for yourself and your loved ones.
An estate planning attorney (coupled with the advice of a financial planner) can provide you with expert advice on how a trust can be a useful component in your long-term financial plan.
While there’s no doubt prudent money management is imperative throughout your entire adult life, there’s an argument to be made that your 30s are the most important years. If you’re in your 30s, now’s the time to maximize your time and resources, eliminate debt, and formulate the habits that will last you and your family for years to come.
If you could use some help making sense of everything or you just want to check-in and see if you’re on track, I’m here to help! Schedule an appointment with me here.