What Every Thirty-Something Should Know About Personal Finance
Your thirties are big years. For many people, this decade comes with a lot of pressure, stress, and decision-making. Whether you’re getting married, buying your first home, or having a family, there are a lot of life events that tend to happen in your thirties and unfortunately many of them involve your finances. You can set yourself up for financial success with these following steps.
Wrap up credit card debt. In your twenties, when you’re just getting started, there can be a lot of costs and debt associated with moving out on your own. And while you may have begun chipping away at those balances in your twenties, it’s absolutely essential to eradicate debt in your thirties. Many financial experts believe this should be your number one focus in this decade. Pay off higher interest credit cards first, followed by student loans, which typically have a lower interest rate.
Bulk up your 401k. In your twenties, your greatest asset is time. Because of compounding interest, the earlier you begin saving in a 401k or IRA, the more you’ll have exponentially when you retire. In your thirties, you start running out of time. Take advantage of the time you have in this decade to beef up your savings. If you can afford to, try maxing out your 401k (maximum contributions are $18,000 for a married couple in 2015) or 15% of your income. A simple Google search will show you how much more you’d have by retirement time if you max your 401k in your 30s versus your 40s.
Readjust your budget. If you established a budget in your twenties, chances are it’s outdated and no longer fits your lifestyle. In your thirties, you have different priorities. You might be establishing college funds for kids or are working on a down payment for a home. No matter the case, make sure that your budget reflects where you are today, not where you were a decade ago.
Cover your assets. Chances are you had very minimal assets in your twenties, but as you age and accumulate more, like a home and nicer vehicles, it’s important to make sure that all of those things are covered by insurance. Also, a lot of the time by your thirties, you have family members who financially depend on you. Make sure they’re taken care of in case of a catastrophic event with life insurance.
Reconfigure your emergency fund. An emergency fund that covered your basic living for a few months in your twenties is most likely far outdated. You’ve most likely tacked on more expensive payments, like a mortgage or auto loan, and you quite possibly have more mouths to feed. Refigure an emergency fund that covers all of your loved ones and monthly bills and even consider extending it out to six months’ worth of backup coverage.
Diversify your portfolio. If you have your basics covered like bills, debt, and a solid emergency fund, oftentimes you can start thinking about diversifying your financial portfolio in your thirties. Consider investments outside of your retirement savings to produce a larger stream of income in your future. People in their thirties are able to leverage their age by taking on semi-risky investments with often larger payouts in the end.