Are you in your 30s and still paying student loans? Do you buy a cup of coffee or lunch every day instead of contributing that extra cash to your 401K? While you're not alone, your 30s is a great decade to build your wealth - the tips below will help set you up for success!
Say Goodbye to Debt
In addition to ramping up your 401K contributions, paying off debt should be one of your top priorities in your 30s. You may not have completely tackled your student loan balance, but by now you probably are starting to see the light at the end of the payment tunnel. Any other debt, like credit cards, should be paid off in full starting with the highest interest card first. Once your credit card balance is under control, make sure you continue to pay your full balance each month so you’re not paying extra interest. It’s important to make payments on time so your credit score remains high and you can qualify for loans or a mortgage when the time comes.
Save for the big day or big trip
It doesn’t matter if you’re currently single or if have a partner, because when you or one of your friends decide to take the plunge, it’s going to cost you. Getting married is a financial commitment - the average wedding in Boston today costs $40,667, not including the engagement ring, honeymoon, rehearsal dinner or any other wedding-related activities. Saving for retirement should be your number one priority but planning for a wedding and major expenses like a trip abroad or purchasing a home requires an advance saving strategy. Set savings goals now, calculate how much you’ll need and start setting money aside.
Living Under Your Own Roof and Within Your Means
Purchasing a home is a big decision and investment. If you are buying in your 30s, it’s important to take a hard look at what you can afford not just at the time you buy, but in the future when your circumstances and income may change. Preventing yourself from being “house poor” is fiscally prudent and also provides a cushion for other things - like paying for that new furnace or roof! If you already own a house or condo, it’s important to pay attention to the interest rate you are paying on your mortgage and evaluate when it’s a good time to refinance or pull equity out of your home by applying for a home equity line of credit.
Plan for Financial Emergencies
Up until now you may not have had many financial responsibilities, but once you hit your 30s you might be paying a mortgage and for childcare. Starting an emergency fund with three to six months’ salary is ideal, but taking a look at your monthly expenses will give you deeper insight into how much money to put aside. Determine how much you can save every month and then set up an automatic deposit from your checking into a separate savings account. It’s important to also have financial flexibility in case you or your partner decide to be a stay-at-home parent. A financial planner can help you create a budget and set financial goals.
College Fund
It may seem like you have plenty of time to save for college if your kids are young, but before you know it, you’ll blink and they’re 18. Starting a 529 plan follows the same general rule as a 401K, which is to save as much and as early as you can. The one exception to this rule is if you have existing debt, you should pay that off first, but then focus on your child’s educational future. You can estimate the potential cost of college by using on online calculator like the one on Rockland Trust’s website.
Investment Fund
This is the time to begin considering other investment vehicles in addition to your 401K, such as a Roth IRA. Since you can’t touch retirement funds before retirement without being penalized, it’s important to diversify where you invest. In addition to setting up multiple investment accounts, consider investing in commercial real estate, for example, or creating other income streams.
Implementing the above strategies in your 30s will create a solid foundation that you can build off of for years to come!
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