For folks in their 30s, life is in full swing. You might have kids, a mortgage and monthly expenses that seem to eat away at your income. While your focus may be far from thinking about retirement, your 30s are a great time to build wealth. Saving for retirement could easily take a back seat to everyday living expenses. That’s not okay!
Here’s the truth: Life never gets less expensive, and saving never gets any easier from here on out. You’ve got to commit to carving out the money and sticking with your saving and investing habits. You can do this!
As you plan out how to build wealth in your 30s, you must assign every dollar you earn a job. Some of your earnings will go to your essential expenses (needs) and discretionary expenses (wants). But don’t forget to pay yourself like a bill and begin to save for the things and experiences on your goals list. You need to have a plan and by having a plan for your money, you can ensure when and how your money is spent.
If you’re a 30-something, consider these wise moves:
Create a spending plan
Having a budget will help you understand your income and your expenses. The key thing here is to spend less than you earn so that you have money to dedicate to your goals. Spend less than you make and invest the difference.
Reduce, eliminate, or refinance debt
As you enter your 30s, be aware of and understand your debt. Eliminating any high-interest debt, particularly credit card debt, is a must. Not all debt can be paid off in a matter of months.
The average student loan debt in America is $32,731. Focusing on reducing the cost of the debt by refinancing a student or vehicle loan might be an option for you. As you eliminate debt, you’ll be able to redirect those dollars to your savings goals. Money that was once earmarked to pay debt, can now go to your savings goals.
Watch your housing budget
If you’re unable to pay cash for your house, remember to spend no more than 25% of your monthly take-home pay on a 15-year fixed-rate mortgage. Don’t make the mistake of becoming house poor, especially at the expense of not being able to save for retirement.
Max out your retirement savings options.
Employers do a poor job explaining all of the benefits that might come with employment. One thing to note is that contributing to a workplace retirement account like a 403b or 401k is one of the easiest ways to build wealth. If your employer offers a 401(k) match, contribute up to the match, and then fully fund a Roth IRA. Your goal is to save 15% of your gross household income for retirement. If your employer does not offer a 401k, consider opening an Individual Retirement Account (IRA).
The most powerful thing about retirement accounts is that they are more than just saving for retirement. In fact, we should replace the phrase “saving for retirement” with “investing for retirement.”
Have your emergency fund securely in place
Keeping adequate savings on hand guards you against dipping into your retirement fund or going back into debt when an emergency happens. And it will eventually. Have your emergency fund securely in place
Keeping adequate savings on hand guards you against dipping into your retirement fund or going back into debt when an emergency happens. And it will eventually.
Pay yourself first
An easy way to guarantee you save for your financial goals is to pay yourself first. Your retirement contribution is deducted from your pay before you have a chance to spend it. One way to save for your short-term goals is to automate it. Before you pay your rent, mortgage, cell phone company, or any other bill, set money aside for your goals. You can have contributions to your savings account automatically deducted from your paycheck.
Save for retirement before you save for your kids’ college
Your kids may or may not go to college, but you will retire someday. So, make saving for retirement a priority over saving for college if you can’t afford to do both.
In closing, remember this about how to build wealth in your 30s; spend less than you earn, and invest the difference. The more you earn the more you are able to invest. Build, increase, and diversify your sources of income. As your income increases, avoid increasing expenses and instead increase your investment contributions. Be mindful about where and how you spend money by tracking your expenses.