I remember looking up to people in their 30s when I was in college. They looked so grown up, like they had it all figured out. The house, the car, the kids... but now, at 35, I realize some of them just went with the flow, without a plan, and are paying dearly for the mistakes of their early days. Your 20s and 30s are the best time to build a strong financial base, to set yourself up for a comfortable life and retirement. It may seem like you are going slow, but you have time on your side. After a decade or so, everything will snowball for the better, provided you put in the effort early on. So let's have a look at the major financial milestones you should achieve by your 30s.
1. Not living paycheck to paycheck
YOLO was a fine saying in your 20s. You're over that now. This is the time to get serious about saving if you want to enjoy what life has to offer. Start by saving $5 a week, $10 the next week, until it hurts. Little amounts will add up.
2. No more student debt
By your early 30s, you have been out of college for almost 10 years. That is a long time to still carry a balance on your student loans. The average debt for the class of 2015 was over $35,000. With some loans including a 0% interest period, or some kind of forgiveness over time, you need to find a way to come up with $3,500 a year plus interest to put towards your loans in your 20s. Your 30s are meant for building wealth, not digging your way out of debt.
3. Credit cards only for rewards
Again, it is time to become financially responsible and say goodbye to credit card debt. A 0% balance transfer can help while you finish paying off the capital. Credit cards should be paid in full each month, earning you rewards, cashback and other loyalty perks.
4. A good credit score
Not all debt is bad. In your 30s, you may want to borrow more money to build the life you want, starting with buying a house. A 0.5% difference on a 25 year mortgage can mean thousands of dollars more in interest. So work on building the best credit history you can, so you can borrow cheap money if the need arises.
5. A 3 months emergency fund
62% of Americans have less than $1,000 in savings. What would you do in case of a health emergency? A roof replacement? Whatever it is, the odds are that in your 30s, you will run into some kind of emergency. Be prepared.
6. Understanding of your company's retirement plan
When you got your first job, you may not have paid attention to your company's retirement plan. Now that you are building a career, you want to make sure each hard earned dollar brings you the best return. Get familiar with your company's plan and invest to get at least the company match so you're not missing out on free money.
7. Contributing to said retirement plan
While saving for your kids' college might be optional -- they can rely on scholarships, loans, and part-time work -- nobody will pay for your retirement. Maxing out your retirement accounts each year, with the money taken straight from your paycheck, is a great way to save painlessly. By automating your contributions so that you never see the money, you won't miss it.
8. An understanding of basic investing
Investing can be as simple or as complex as you make it. Returns will be correlated to risks, from safe CDs, to equities, to highly leveraged real estate, you need to understand what you are doing to become a successful investor. You can start building good investing habits with as little as $1,000. Save some money, put it into low-fee index funds, wait a few decades and watch it grow. As you learn more about investing, you can diversify your portfolio and balance your risk.
9. Maximizing tax free savings
There are many ways to invest your money in tax free and tax-deferred vehicles. Now that you make a decent living, you want to minimize your tax burden as much as possible.
10. Starting to invest on the side
On top of your retirement account, you should also look into investing on the side. Long term, the returns of a balanced portfolio of stocks and bonds will be much better than those of savings accounts, provided you can afford to leave the money there for the mid to long term. Unlike retirement accounts, you will be able to withdraw without penalties when needed. Consider using a robo-advisor to manage your taxable investments. In addition to automated rebalancing and asset allocation, you'll be able to take advantage of tax-loss harvesting without the headache of trying to manage it yourself.
11. A mid-term fund for yearly expenses
An emergency is an emergency, as in something you didn't expect. But car repairs, insurance premiums, taxes etc. come around every year and can be budgeted for. You should have enough money to cover that in cash, by saving a little every month for recurring big expenses.
12. Savings for short term splurges
Christmas also comes around every year, and you're probably going to spend more than you usually do. So again, build up a holiday fund, a Christmas fund, a gift fund, so the spending doesn't take you by surprise.
Keep reading about the other 18 financial milestones you should achieve in your 30s over at Investment Zen
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