The BIG 3-0.
The age that you’re really an adult. In your 20′s, you could still swing being a bit immature.
Once 30 comes it’s game over. And now that I’m 35….
Dang! Am I really 35? <sigh>
Halfway through my 30′s and I’ve been rocking it the best way I can.
As a result, I’ve had some time to reflect on the things I’ve done right — and things I’ve done wrong <<— trust me… there’s been plenty of wrong.
Living as a 30-something brings a lot of new and interesting financial challenges.
You are probably making more money now than you ever have before, but you also have more challenges.
And this decade is one in which the thought of retirement and other financial issues becomes a little more “real.”
Whether you are about to turn 30, or whether you are heading into your mid-30s, now is a good time to review the following 30 financial rules for your 30s:
1. Create Spending Priorities
By now, you should have a good idea of what you value in life, and what kind of lifestyle you want to lead. This means that it’s time to stop spending on stuff that isn’t important to you. Do you know how much crap I bought in my 20′s that was a complete waste of money? Too much.
Sit down, think about what you want to accomplish with your money, and then create a list of spending priorities that works for you. Then, spend according to those priorities. Your spending will be more in line with your values, and you’ll be happier as a result.
If you have a spouse, this involves them, too. My wife and I are constantly talking about what are the important things we want to spend our money on. In our 30′s the constant topics revolved around upgrades to our home, travel, investing into our businesses, and our kids – three growing boys really add up!
2. Look for Good Value
You work hard for your money. Make sure you are getting the best value. This doesn’t mean you get the cheapest thing — and you don’t need to get the cheapest thing, now that you can afford items of good quality.
My wife is the queen at this. She always finds way to save a quick buck.
Make purchases based on true value (financial and emotional), rather than solely on bottom line.
3. Value Your Time
I’m sure you’ve heard the expression “Time is Money“.
Your time is probably more valuable than just about anything else. Value your time. You don’t need to constantly trade your time for money. Look for ways to maximize your time, and to earn more efficiently.
And, if you can afford it, don’t be afraid to pay others to take care of mundane tasks that you don’t want to waste your time on.
4. Evaluate Your Financial Progress Thus Far
How far have you come? Acknowledge your progress. It will provide you with the motivation you need to keep going. Honestly evaluate your missteps and figure out how to fix them.
The good news is that, when you’re in your 30s, you’re old enough to recognize what you should be doing, but still young enough to recover from some of the financial stupidity that may have afflicted you earlier.
5. Buy a House the Right Way
If you waited to buy a house until your 30s, make sure you do it right. Don’t get in over your head. Make a good-sized down payment. A modest home that you can afford will allow you to avoid being house poor and leave your resources available for other things.
We bought our first home when I was 29 and deployed to Iraq. We were able to buy direct from the owner since he was a family friend. This saved us thousands of dollars because of the sale price and avoiding realtor commissions.
If you’re still renting and you’re not sure if you should buy a home, use the calculator below to run the numbers.
6. Invest in Reliable Transportation (Beware of New Cars)
Make sure that you have a reliable way to get to where you need to go. If you need to get to work, you need a car that can reliability get you there — or at least live in an area with reliable public transit.
Does that you mean that you need to buy a brand new car? Absolutely not!!
See the video below in response to a reader that tried to convince me that they needed to buy their child a brand new car because they needed something reliable.
7. Protect Your Financial Assets
Do you have property insurance? If not, now is the time to get it. By the time you reach your 30s, you have likely accumulated more valuable things. From a nice car to a bigger house, you probably have more to lose in the event of a catastrophe. Even if you rent, you should get renter’s insurance.
Think about the things you have. What would it cost to replace them? Insurance can help you cover that cost without breaking the bank.
8. Buy Health Insurance
Now that you’re getting older, you need to think about health insurance. Even if you live a healthy lifestyle, there are reasons to have health insurance. If you have kids, you definitely need health insurance. If you can afford a high deductible plan, it can make sense (if you have relatively few health care needs and costs) to purchase one.
You can then put money into a Health Savings Account, earning you a tax deduction and allowing the money to grow tax-free as long as you use it for qualified expenses.
9. Provide for Your Family with Life Insurance
If people rely on you for their livelihood, you need life insurance. There are many rules of thumb out there, but the important thing is that your family is provided for until your youngest is an adult.
Figure out how much you need to ensure that your family is taken care of if something happens to you, and purchase a term life insurance policy that fits your needs.
10. Make a Will
Over 55% of the US population have not drafted a will. At the very least you need a will to make clear the disposition of your assets. And, if you have children, your will provides for their guardianship.
Create a will. Right now.
11. Be Mindful of Your Beneficiaries
If you are accumulating wealth at a rate faster than you anticipated, it’s probably a good time to start estate planning. Structuring your assets so that your heirs benefit is a great way to ensure that you have continuity. Estate planning tactics like power of attorney and health care proxy can ensure that your wishes are carried out if you are alive but incapacitated.
A common estate planning mistake I see is not updating beneficiaries on retirement plans and life insurance policies. I heard a horror story where a husband never changed his new bride to the beneficiary of his life insurance policy at work.
An unfortunate auto accident took his life and his bride was left with nothing. The parents didn’t give their new daughter-in-law anything (for reasons beyond me).
A routine check of the beneficiaries could have prevented this.
12. Prepare for the Unexpected with Supplemental Insurance
In addition to other types of insurance, make sure that you consider the possible need for supplemental insurance. If you are concerned that you will become disabled and unable to make a living, short-term or long-term, you need disability insurance.
Since I’m the primary bread winner we took out a long-term disability policy on myself. If I was no longer to work, we would receive over $4,000 a month.
I’m also looking into dental insurance with an orthodontics rider since my sons will doubtless need braces (mommy and daddy also had braces).
Take stock of your needs and consider supplemental policies.
13. Plan for the Costs of Children
If you have a young family, or if you are planning a family, now is the time for you to get ready for the costs that can come with kids. As your children grow, they get more expensive. We have 3 young boys are they are already eating us out of house and home.
The scary part. It only gets worse!
From providing the essentials for survival to paying for extracurricular activities, set aside a little bit regularly so that you are prepared for the costs associated with raising kids.
14. Start Saving for College
The earlier you start saving for your child’s college education, the better. If you haven’t opened a 529 or some other account that you can use to save for your child, do it now.
You don’t have to completely cover your child’s college costs, but you can help. We intend to help our sons pay for their living expenses and book costs, but we have no intention of paying 100% of their tuition. We would rather encourage them to apply for scholarships, join the military (more me than my wife), or work while they are in school.
Whatever you do, don’t put your retirement at risk, but get started now.
15. Use Credit Cards Wisely
Credit cards can be your friends. If you use them wisely, racking up rewards points on planned purchases and paying off the balance each month, you can derive great benefits from credit cards.
We currently have 4 credit cards (1 personal, and 3 business) that we use and pay off each month. In fact, my wife obsessively sends in payments 2-3 times per month because she doesn’t want to carry a balance even in the smallest amount.
Cash back, free travel, and other perks can help you get ahead financially just by spending on things you normally buy.
16. Pay Down High Interest Debt
Now is a good time to turbo-charge your debt pay down efforts. If you’re making more, and you’ve prioritized so that the unimportant spending is cut from your budget, you should have some extra cash to put toward reducing high interest debt. Getting rid of this debt can free your resources for other things that will help you earn interest, rather than result in you paying interest.
17. Reconsider Pre-Paying Low Interest Debt
I’ll probably get some flack for this one, but maybe now isn’t the time to pre-pay your mortgage or your student loans. It you have a mortgage with a low interest rate, ask yourself if your money could be put to better use in other investments.
The stock market continues to soar, and I’ve made made double digit returns with both Lending Club and Prosper this year which makes you wonder “does it really make sense paying off low interest debt?”.
I don’t think there’s a right or wrong answer. We’ve financed our home twice to a 15 year mortgage which means our house will be paid off before our kids graduate high school – sweet! We still have enough money to save for retirement but we’re not making any extra payments on our mortgage.
If you’re thinking of aggressively paying your home off early, with your mortgage, consider the rate, as well as the tax deduction.
18. Create a Retirement Plan
Many people in their 30s have yet to perform a retirement calculation. Now is the time for you to perform that calculation. Use one of the many online calculators to figure out what you need in retirement, and what you need to do now to meet your goals later.
Get serious about what you want to do in retirement and make a plan.
19. Boost Your Retirement Savings
If you’re making more as a 33-year-old than you were as a 26-year-old, why haven’t you updated your retirement savings contribution?
I run into people all the time that think putting away 5% of your income is enough. Or sometimes they tell me they put in enough to get the 401k match. Ummm….good for you, but you’re not even close.
You’ll want to work to save at least 20% of your income.
Don’t stress and think you have to start there. Boost your retirement savings contribution periodically. Every pay increase should be accompanied by a savings increase.
20. Open a Roth IRA
Don’t rely solely on your company’s retirement plan. If you qualify, open a Roth IRA and make contributions. With a rising federal deficit, and with income tax rates that are relatively low (when you consider history), chances are that higher taxes are coming. A Roth IRA can shelter some of your income from taxes while giving your retirement a boost.
Find the best options to open a Roth IRA. We breakdown all your online options HERE.
21. Increase Your Emergency Fund
Take a look at your emergency fund. Is it big enough to cover your current lifestyle? Chances are that you have more expenses and obligations now than you did in your 20s. The emergency fund you had for that decade just isn’t going to cut it for your 30s.
When my wife and I were married, we had about $500 in our savings account. <gulp>
That wouldn’t even come close to cutting it now. We currently keep around 12 months of emergency funds on hand. We’ve had more than that when we were building our home, but we’ve never went below that.
Increase your rainy day fund because I promise you that one day you’re going to encounter a financial thunderstorm.
Here’s our list of the top savings accounts online paying the highest rates.
22. Diversify Your Investments
Is your portfolio appropriately diversified? Now that you have a little more money to use, it’s a good time to change things up a bit and diversify.
I’ve done this with my investments by getting into stocks, mutual funds, and peer to peer lending
Diversification is important across many fronts.
23. Build More Human Capital
Rather than stagnate in your 30s, continue to develop new skills. Build your human capital so that you can justify promotions and raises. Keep learning and keep your skills sharp. That way you’ll always be valuable to someone, even if you lose your job.
24. Diversify Your Income
Now that you’re in your 30s and things have settled down a bit, it’s a good time to consider income diversity. Don’t rely on your day job for your entire financial well being. That’s just asking for trouble.
I’ve been able to diversify my income by starting this blog and other online ventures to compliment my revenue from my financial planning practice.
Try to cultivate income diversity with side gigs, investments, and other endeavors. That way, your entire family’s financial future isn’t at risk if you’re fired from your job.
25. Look Into Umbrella Insurance
If your assets are growing, you might need umbrella insurance. This extra liability insurance can protect your assets if you are the target of a major lawsuit.
What’s the cost? For $1 million in coverage, the cost should be around $150-$200 (mine was $180) a year. For each additional $1 million in coverage, you should expect to pay an additional $100.
Now that you have the means, start giving to others. Charity is an important part of well-rounded finances. Give what you can to help others. You can even volunteer your time, which is also a valuable commodity.
My wife and I tithe 10% of our income to our church as well as donate to other charities. I will admit that this wasn’t something we did straight out of the gate. It took years to get to the point of feeling financially comfortable to do both.
Look for ways to give back, since you likely receive help early on in your life.
27. Get Financial Planning Help if You Need It
As your finances become more complex, there is a good chance that you will need help working through the ins and outs. Whether you need help with tax planning (I love my accountant), plotting a retirement course, or figuring out what insurance policy is best for you, consider working with a financial planner that has no conflicts of interest.
Here’s some help in hiring the right financial planner for you. A professional perspective might be just what you need.
28. Maintain Flexibility
Sometimes it’s all about having flexibility. Can you move your money around to take care of an emergency? If you had to pick up and move, could you do so and then work out the details later? If you lost your job do you have the flexibility to find something else, or the creativity to get by with your emergency fund?
Develop a flexible approach so you can move with the changes.
29. Live a Little
Remember that your money can be a means to an end. You can live a little, too. Don’t just assume that you have to amass a huge fortune. And don’t wait until you’re too old to enjoy your money.
I’ve have clients that have literally worked their entire lives and now in their 60′s are beat down. I’ve told my wife that while I want to work hard, I want to make sure that we take plenty of time for ourselves. All work and no play is not what living life is all about.
Spend a little on some great experiences and family memories.
30. Never Stop Dreaming
Just because your 30 doesn’t mean that you can’t try new things. Want to travel overseas? Do it.
Want to learn how to play guitar? What’s stopping you.
Always wanted to be your own boss? Who says you can’t?
As kids, we dream about doing awesome things. Don’t let those dreams die. As the message of the video below declares, “Don’t stop dreaming!”
What do you think of these rules? What financial rules do you think should be adopted by those in their 30s?