After establishing solid financial goals and foundation in your 20s, use the next decade of your life to keep building and protecting your wealth. Your finances might have felt like a hole in your twenties, but with a bit of focus and determination you will strive throughout your thirties and beyond.
Advance your Career
In your twenties, you developed a marketable skill. Now it’s time to apply that skill to increase your earnings. Research potential career paths for workers with your skill. Identify the types of jobs and companies where you might fit. Consider whether you should go back to school for an advanced degree. You might even consider moving to a city where you can find more opportunities in your field. Sharp career turns can be worthwhile but also risky. You’ll need a financial plan to keep your budget steady while you’re changing course.
Rethink your Budget
You established a budget in your twenties and perhaps accumulated some savings. But your income and expenses, as well as your needs, wants and dreams, will likely change from year to year. Your budget will need to adjust to life changes such as getting married, having kids or starting your own business. You may need to cut spending in some areas to reallocate elsewhere.
Increase your Emergency Fund Balance
An emergency fund is money you save and put aside to cover a financial shock. This could be losing your job, or a large, unexpected expense. It can prevent you needing to borrow money or make difficult financial decisions in those moments, by giving you savings to fall back on.
Remember, your goal is to maintain three to six months’ worth of living expenses in your emergency fund. As your income and expenses go up, so should the amount in your emergency fund.
Set Financial Goals
If you haven’t yet set any money goals, your 30s are a good time to create both short-and long-term financial plans. Whether you want to save a certain amount by retirement, establish an emergency fund or buy a home, the time to start planning is now. Not setting goals is the biggest mistake people can make in their 30s because setting goals provides financial direction and establishes timelines for achieving the great things in life, like financial independence, buying homes, having kids and starting businesses.
Saving for Retirement
Money experts frequently emphasise the importance of starting to save for retirement early. A person in their 30s has the tremendous opportunity to harness the power of compound interest, where even small amount invested can grow large over enough time. You can’t rewind the clock when it comes to setting aside for your future, so this is a mistake you want to avoid. Target 15% of your income to set aside for ‘future you’.
Keep track of Spending
By your 30s, you should be keeping tabs on where your money is going. Mindless spending on a day-to-day basis adds up and can be the biggest destroyer of wealth over time. To avoid overspending, you first need to master cash flow. Start by monitoring your spending habits over a 30-day period. After writing down every purchase you made and money you spent in a month, you’ll begin to notice patterns in where your money is going and where it’s possible to cut back.
One of the hardest parts of personal finance is striking a balance between establishing a comfortable lifestyle and consistent savings. The only way to strike that balance is to intimately understand how money comes in and out of your life.
Protect your Family
Many people have babies in their thirties, giving them new financial responsibilities. If you haven’t already, now is the time to make a will and consider life insurance or critical illness cover, if you are worried about how your family would cope financially without you.
Make time for Investments
If you have any spare cash, your thirties is a good decade to get started with investments. Research shows that, over the long term, investments tend to outperform cash savings over long periods.
Put yourself first
It’s natural to want to help your nearest and dearest – but do think carefully. Your own financial security if your first priority. And sometimes it’s best to help people solve their money problems in a more creative way than writing a cheque.
For parents, the pressure to give your children everything they ask for is huge. But earning pocket money, having a part-time job and taking on manageable student debt is part of the learning curve for your children. If you can teach them good money habits, they’ll have them for life.
Plan for those next big life milestones
Weddings, honeymoons, babies, new homes, new kitchens, family holidays, career breaks, university degrees, start-up businesses…