Following up with this lifetime of savings series, we have talked about how to save money in your 20s and how to build solid foundations for your adult financial life. Now let’s see what should be tackled in your 30s.
Make up for your 20s
Don’t beat yourself up. You have made mistakes in your 20s, now it is time to pay them off. Put all the money you can towards your consumer loans, student loans, credit card debt, etc. And once you are done, try to keep throwing that same amount on your savings account. Now that you make more money, it should be easier to get rid of your debt quickly.
Buy a house
Buying a house is not for everyone, and sometimes it makes more sense to rent than own, even in your 30s, but investing in real estate is a great way to build wealth. I didn’t want to buy my main residence in my late 20s-early 30s as I knew I wouldn’t live there forever, not even for the next 10 years. So instead I chose to invest in a college town, where I could easily rent the place to students once I decided to leave. The rent creates an extra income while the principal is being repaid by said rents as well.
If you know you will establish yourself in a city where the cost of real estate is reasonable, you should try to buy a place and start building some equity. It is like a forced savings account, every month, you repay a little bit of the price of the house, and will own it in a few decades, hopefully before you retire.
Get a new job
If you have evolved slowly but surely at your job for the past few years, it is time to apply for a new job. That is your best chance to get a better raise than the usual 3-5% per year. So brush up that curriculum and start applying. Or look for better opportunities within your company.
Bank the raise
In your 30s, you are probably living with your other half, maybe even with your children. Still, they are not evil teenagers always asking you to buy them the last gadget and fancy clothes. So if your family was living well on X and you were just promoted to Y, try to bank (Y-X) for a little while and invest the money until retirement age. Just make an automatic wire to savings on pay day and pretend the money doesn’t exist. In your 30s it is easy to jump from job to job with a 10-20K raise each time, so it could mean big savings.
Adjust the family budget
Now that you are a couple or a family, it is time to discuss finances with your partner. Set your long term goals, review and merge your budgets and your saving plans.
Money is often the reason for divorces and fights, so communication is key there. Sit down with the last bills and statements and see where you want to be in 5, 10 and 25 years.
Max out company match and tax free savings
At that point, you should be able to take full advantage of your company match at work, and to max out your tax free savings accounts each tax year. You can still use your ISA later on if you need cash, although you won’t be able to fund it back, once your used it, the allowance is gone!
Protect yourself
Those carefree days are over, now that someone else, and maybe little ones, depend on yourself and your income. It is time to think about life insurance, disability insurance, and of course, home insurance, both building and contents insurance. You should also review your healthcare plan to check conditions about maternity and prenatal care.
Invest for your kids
Your 30s are the time to stop thinking about you and start thinking about your kids. Did you know that if you save £1 a day from conception to college, you could make your kid a millionaire by the time he/she retires? Check the link for the exact math, but that is pretty cool. Your 30s are the time to start a college fund, a car fund, a whatever fund for your kids, so you can afford to kick them out of the house when they turn 18 🙂 just kidding.
Doing all this should help you keep building a solid ground to enter your 40s. See you next time to talk finances and saving money in your 30s.
What would you add to my list if you are over 30?
“Banking the raise” is so important in your 30s. Long-term wealth can be created fairly easily by not falling into the trap of lifestyle inflation. If you ask most people who are 25-30 and earn £25k a year (for example), they will say that they are spending 90% of their net income (£22.5k) and are completely happy with their lifestyle.
However, by the age of 40, these same people are now earning £40k a year, but instead of still spending £22.5k, they are now spending 90% of their new net income (£36k). Are they any happier? I doubt it…
Well I’m nearly my 30s,nad i’m looking for my first home and I am talking with a lot of bank…
but honestly I started to have a budget and important financial goals to achieve only a couple of year ago. The list is correct but most people spend money in not essential things, well I did the same until I decided to have a more frugal life, that doesn’t means a poor life. Rules are make a plan with sort-medium and long term goals, a plan to achieve them fixx a budget and follow it,
Plan, organization and discipline will help to achieve every goal!!!
Thanks for the shout out! Life insurance is definitely an important piece to get right.
We don’t have kids yet, but we’ve already made some of these steps in our 20s. We got on the “financial responsibility” train quite young. We don’t have that much to make up for because we have made some pretty good decisions so far, and have invested our money.
I never really thought about how much would wind up banked if you put away at dollar a day for your kid once you knew it existed. Great idea!!
Great list! I’m turning 30 this month and fortunately my 20s haven’t been too reckless. I really need to focus on raising my income, though.
Put a little aside in savings as you pay down your debt … cash is king in this unstable world in which we live, so it helps to have as much on hand as humanly possible!
I was commenting around this topic on GRS yesterday. Typically, moving companies will allow you to command a 10%-40% raise for the same type of work. You can also take your time and “shop around” to find the best opportunity that is out there for you.
A new company will rarely be able to find out how much you are actually paid so you have quite a bit of leverage.