Are You on Track with Financial Planning in Your 30s?
In your 30s, you may be settling into your career, creating a family, and building a foundation for your future. The decisions you make now can have a significant impact on your long-term financial well-being. In this blog, we discuss 11 practical financial planning tips to help you take control of your finances in your 30s.
What are some financial planning tips for professionals in their 30s?
- Invest for your future self
When it comes to investing, your 30s are the perfect time to get started if you haven’t already. You still have many years ahead to take advantage of compounding interest. Consider contributing to retirement accounts such as a 401(k) or an IRA. The maximum contribution for a 401(k), 403(b), most 457 plans, and the Thrift Savings Plan is $23,000 for 2024. It might be difficult, but it is highly beneficial to max out your contributions during your 30s so that your savings can compound for several decades before retirement.At the very least, it’s best practice to contribute enough to your workplace retirement plan (if available) to receive a matching contribution. This is essentially free money from your employer - Make sure you have an emergency fund
An emergency fund provides liquidity and peace of mind during unforeseen circumstances. Up until now, you may not have had many financial responsibilities, but once you hit your 30s this can change. We live in an unpredictable world, so it’s essential to have a robust emergency fund. It’s best practice to have about six months’ worth of living expenses in a liquid, easily accessible account. - Get rid of high-interest debt
High-interest debt can prevent you from being financially free. Prioritize paying off high-interest debt like unpaid credit card balances or personal loans. Getting rid of debt will allow you to save and invest more of your income. When people want to know which investments will lead them to financial freedom, paying off high-interest loans can be more advantageous than relying on exceptional investment results. - Avoid lifestyle inflation
As income increases, people’s wants and needs tend to do the same. We support allocating your money to things that give you joy. However, try to maintain a frugal mindset and resist the urge to upgrade your lifestyle with every increase in income. Automating savings can help you stick to a budget and avoid the temptation to spend “extra” cash on expensive purchases you don’t need. - Talk about money with your partner
By your 30s, you might be married, in a long-term committed relationship, or heading towards one. You’ll need to become comfortable talking about money with that person.My wife and I have a money date once a month. We sit down for a nice dinner and go through the latest in our finances. It helps us stay on the same page, and we both feel like we are working together to achieve our financial goals.If you aren’t doing something like this yet, see if you can make it part of your routine. These discussions can help you stay on track, make informed decisions, and address any financial concerns before they become major issues. - Review your insurance coverage
Insurance can often be forgotten when we have busy lives but it’s important to ensure you have adequate insurance coverage to protect yourself and your loved ones. Review your coverage regularly to make sure that your insurance still meets your needs and that you’re not paying more than you should. - Thoughtfully think about homeownership
Consider your financial readiness carefully if buying a home is on your radar. Several factors should be taken into consideration, including the housing market, mortgage rates, and your ability to deal with homeownership costs. The general rule of thumb is that housing costs should be no more than 28% of your gross income. - Prepare for kids and the cost of having them
If you plan on having kids, it’s a good decision to prepare yourself financially. That’s especially true if you’re planning to take a career break or don’t have paid family leave at work. If it looks like college is in your kid’s future, you may want to consider investing in a 529 college savings plan. This allows your child’s college savings to grow tax-free if used for education. - Set Clear Financial Goals
Start by identifying your short-term and long-term financial goals. Having specific goals will help guide your financial decisions and motivate you to stay on track. Create a plan to monitor these goals over time. - Career Development
Investing in your career can have a direct impact on your earning potential. You may be able to enhance your skills and make yourself more competitive in your field by pursuing further education or certifications. It may also be a good time to negotiate your salary. - Budgeting
The last, but one of the most important tips, is to maintain a detailed budget to track your income and expenses. This will help you identify areas where you can cut costs and allocate more funds toward your goals and your future. Budgeting also provides a clear picture of your financial health and allows you to make informed decisions about your spending habits.
What should I be doing with my money in my 30s?
You should have a good financial plan in place by your 30s. Despite unexpected events, it would be good to know your short- and long-term goals and have a plan to reach them. A short-term goal may be planning to purchase a house, while a long-term goal might be saving for retirement so you can retire early.
How much should you be investing in your 30s?
The exact amount that you should be investing in your 30s will depend on your situation. The general recommendation is to invest around 10-15% of your income, but that will depend on your situation. You can take advantage of the power of compounding if you invest more during your 30s. Invest as much as you can during your 30s to reap the rewards later in life.
Should I get a financial advisor in my 30s?
Whether you should work with a financial advisor in your 30s depends on various factors, including your financial situation, goals, and comfort level with managing your finances. We generally recommend working with a financial advisor when at least one of these applies to you:
- I am saving $1k/month or more
- I make $120k or more (or > $220k as a couple)
- I receive RSUs at work
- I have $200k or more in invested assets or cash
Ultimately, the decision to get a financial advisor depends on your circumstances and comfort level with managing your finances. If in doubt, a free consultation with a financial professional can help you assess your situation and determine whether hiring an advisor is the right choice for you.
Is 35 too late to start investing?
It is never too late to start investing. If you are 35, you still have 30 or more years to take advantage of the power of compounding. It’s important to make sure that your investing strategy is right for your age. Your strategy will change as you grow older and your situation changes.
