Financial planning in your 30s can be a daunting and complex task. Financial planning and strategic decision-making are essential for managing debt, investments, retirement plans, and many other aspects of life. Especially in times of economic uncertainty, financial planning in your 30s can be daunting. According to the Federal Reserve, only 34% of people between the ages of 30-44 are on track with their retirement savings, and 71% have any retirement savings. In fact, the average retirement account savings in the United States is $73,100. This doesn’t seem like a lot of money, especially if you’re planning to retire by the age of 65. In this article, we’ll discuss financial plans for people in their 30s and give some great tips and examples of how you can build long-term financial wealth and a retirement fund that won’t retire on you.
Establishing Financial Goals in Your 30s
Turning 30 sometimes feels like you’ve reached the end of the road but believe us when we say it’s just the beginning. Your 30s can be an exciting time in terms of financial planning and strategy. It’s the time of your life when you are perhaps settling into your career, starting a family, and building the foundation of your future. Everyone should have some sort of plan or idea regarding their finances. However, in today’s climate, that isn’t always the case. In this section, we’ll talk about some of the most common financial goals for those in their 30s.
Build an Emergency Fund
A safety net for unforeseen bills or monetary losses is called an emergency fund. Set aside three to six months' worth of expenses in a separate savings account. It gives you peace of mind and prevents you from incurring debt during trying times. This can help through things like an unexpected illness or death, sudden loss of employment, an injury that forces you out of work for an extended period of time, or something else like car troubles or emergency home improvements.
Get Rid of High-Interest Debt
Most people have been in this situation: you apply for a loan or a credit card during a time of hardship, and despite the alarmingly high-interest rate, you take it because you need the funds. That’s okay! When you reach your 30s, one of the best financial goals you can make is to pay off that high-interest debt. Prioritize tackling the debt so you can save more money in your 30s and plan other financial goals to help set you up for the future!
Save for Retirement
Retirement? In your 30s? Who has time for that? Well, you should! It’s never too early to start planning for retirement. Consider contributing to a retirement account like a 401(k) or an individual retirement account (IRA). If your employer has options for contribution matching, that is one of the best ways to build up a strong start in your 30s. Some companies will match what you contribute, and others will contribute a set percentage to your account. Typically, a good goal would be to contribute around 10-15% of your income toward the retirement account. Additionally, a more popular option has become high-yield savings accounts that accrue a much higher interest rate than traditional ones.
Invest for the Future
Wall Street, baby! One of the most common ways for those in their 30s to set themselves up financially is to invest in things beyond their retirement account. If you’re looking for a way to invest your money wisely, consider investing in stocks, bonds, or real estate. This, of course, depends on your tolerance for risk vs. reward and your long-term financial goals. Diversifying your portfolio to minimize risks and aim for long-term growth is a great way to build your finances in your 30s.
Protect Your Assets
As you start to build your financial goals and aim for long-term wealth in your 30s, it’s important to protect your loved ones and your assets. You can accomplish this by purchasing life insurance, disability insurance, or liability insurance policies to help safeguard you and your assets against any unexpected events that could destroy your financial progress and goals.
Example Personal Financial Plans for People in Their 30s
Your 30s are an exciting time as far as your personal growth, career development, and financial prowess. However, some people in their 30s don’t have a blueprint or a plan that is solid or concrete to help them reach whatever goals they want. This could include things like buying a home, purchasing a new car, becoming a stock market savant, or creating wealth through savings accounts and retirement funds. In this section, we will review several examples of people in their 30s who are trying to accomplish some common financial goals and how they can go about it the right way. Feel free to utilize these examples for your own benefit!
Example 1: Sarah Wants to Buy A Home
Sarah is a 32-year-old professional who dreams of buying her first home in the upcoming years. To do this, Sarah created a detailed financial plan. Her plan includes:
Saving up for a down payment: Sarah did some research on the local housing market and looked at the average price of buying a home in the area of town she loves. She has set a goal of saving up for a 20% down payment in order to avoid private mortgage insurance. She has calculated that she will have to have saved up at least $100,000 for the down payment on a $500,000 home. Her goal is to buy this home within the next 4-5 years, meaning she will have to put away just over $2,083 a month to reach her goal within four years.
Budgeting and Expense Management: To reach her goal, Sarah tracks her spending on a monthly basis and identifies the areas where she needs to pull back her spending. She creates a budget that properly allocates funds for essentials, savings, and other expenses. She cuts back on eating out, unnecessary subscriptions, and entertainment in order to save more money.
Additional Income Sources: Sarah looks for other ways to make money. She has taken up some freelance projects in a related field that she works in and manages to generate an extra $600 per month. She uses this additional cash flow to boost her savings.
Explore Down Payment Assistance Programs: Sarah does extensive research into down payment assistance programs in her area. She learns about a first-time homebuyer program that provides grants and low-interest loans. She discovers that she qualifies for the program and applies, which helps reduce her down payment cost.
Build Credit and Mortgage Pre-Approval: Sarah constantly reviews her credit report, making sure that there are no negative marks. She pays on time and reduces her credit utilization to help improve her credit score. She gets in touch with a mortgage professional to help her get pre-approved for a home loan which helps her get a better idea of her budget and helps her prepare for the process of buying her first home.
Example 2: Mark Saves for Retirement
Mark is a 35-year-old software engineer who wants to make sure he has a comfortable retirement set aside. He starts to come up with a comprehensive financial plan that is tailored to his own retirement goals. Here is how he does it:
Assessing His Needs in Retirement: Mark calculates his projected retirement costs based on his preferred lifestyle. He determines that, after accounting for inflation, he will require an annual income in retirement of $80,000 to live comfortably. Depending on where Mark eventually ends up in his retirement, this number may be higher. Mark also looks into retirement overseas, which includes some relocation programs for citizens looking to move to European countries.
Maximize Retirement Account Contributions: Mark utilizes his employer's 401(k) matching program to its fullest potential. In addition to receiving an additional 5% from his employer, he contributes 10% of his salary. Additionally, he starts a Roth IRA and makes the maximum annual contribution to it. Mark also does research into alternative savings accounts, such as high-yield savings accounts.
Diversified Stock and Investment Portfolio: To create an investing strategy that is in line with his risk tolerance and goals for the future, Mark works with a financial advisor to help him get situated with the stock market and investment opportunities. They mix stocks, bonds, and index funds to construct a diversified portfolio that strikes a balance between risk management and growth potential. Additionally, Mark looks into real estate investment as a way to build a stream of passive income.
Regular Rebalancing of Portfolio: Mark periodically reviews and rebalances his investment portfolio to maintain an adequate asset allocation. This strategy makes sure that, while taking market conditions into account, his assets are in line with his long-term retirement goals.
Financial Education and Upskilling: Mark is aware of how crucial it is to keep up with market developments and investment strategies, as they are constantly changing. To increase his knowledge, he takes online courses, reads books, and attends workshops. In order to boost his earning potential, he also looks into potential career growth opportunities.
Example 3: Jenna Wants to Get Out of Debt
Jenna, a 38-year-old marketing manager, wants to eliminate her high-interest debt and gain financial freedom. She creates a strategic financial plan to pay off her debts in an efficient way. Here is her plan:
Debt Inventory: Jenna creates a list of all her debts in a spreadsheet. This includes credit card debt, student loans, personal loans, car loans, and her mortgage. She takes notes of their balances, the interest rates, and the minimum monthly payments that she is making on these accounts.
Which Method? Snowball or Avalanche Method: Jenna realizes that there are two ways she can go about getting rid of her high-interest debt: the snowball method or the avalanche method. These are two popular strategies for debt repayment. The snowball method focuses on paying down your smallest debt before moving on to the larger ones. This strategy is about building momentum as you pay off your debt. The downside of this method is that there is the potential of paying more money in interest over time. The other strategy, the avalanche method, is when you focus on paying off the debt with the highest interest rate first and then work your way down. The less money paid into interest means more that you can put toward the repayment of the principal amount. Jenna chooses to use the avalanche method.
Cutting Expenses and Increasing Income: Jenna looks over her monthly expenses and notices areas where she can reduce her spending. She cancels the unnecessary subscription services, lowers her expenses of dining out, and finds different ways to save on utility costs. She also explores freelance opportunities and additional work to increase her monthly income.
Debt Consolidation and Refinancing: Jenna looks into ways to consolidate her high-interest debts into a lower-interest loan and looks at refinancing her existing loans. She meets with a financial advisor to help her determine her best options, how she can potentially save on interest payments, and how she can simplify her debt repayment process.
Celebrate Milestones: Jenna knows that paying off her debt is going to be a long journey. To help her stay motivated and on track with her plan, she celebrates milestones along the way, like paying off a certain debt or achieving a certain percentage of her total debt reduction. Celebrating these milestones helps her stay positive and focused on her financial goals.
Hire a Financial Advisor
If you are in your 30s or about to be in your 30s and need help reaching your financial goals, working with a financial advisor can be a fantastic way to make sure your plans for your future are as solid as possible. Expertise.com features a directory of the best financial advisors in your area to help you reach your financial goals in your 30s and beyond. From buying a car to buying a home and building a strong stock portfolio, these financial advisors can assist you in creating and sustaining a strong financial plan to get you back on track or help you better prepare for the future. Discover the financial advisor of your dreams today and start planning for your financial freedom!
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