There’s a famous bible verse in 1 Corinthians 13:11 King James Version (KJV) which states:
When I was a child, I spoke as a child, I understood as a child, I thought as a child: but when I became a man, I put away childish things.
This verse really resonated with me a few years ago on my 30th birthday. Something about entering my 30s made me feel like an adult and as an adult, I had to put away my childish ways, especially when it came to my personal finances.
Life can get complicated when you hit 30. You might be in the middle of countless transitions, like moving up in your career, starting a business, buying a home, getting married, growing your family — and a whole lot more.
I help my clients with these transitions and other concerns daily, and the most important thing I’ve learned is that life is complicated enough. Your money doesn’t have to be equally as hard to figure out.
By focusing on a few key tenets, you can gain control of your finances. This is my best advice, pulled from both my professional background and real-world experience, to help you do more with your money (while stressing less about it).
You still have time on your side, so even small moves can make a huge difference in the long term.
Invest in yourself
This is the time to separate from the pack. Spend some of that hard-earned money wisely to gain the advanced education, industry certification or specialised job skills necessary to make yourself more qualified, more marketable and ultimately indispensable.
Just because that diploma/degree hangs on your office wall doesn’t mean you’re done learning. Do what your colleagues won’t do and spend the extra money and time to collect more arrows in your quiver.
The financial crisis took its toll on many 30-somethings back in 2008 who today, now entering their 40s, may still believe they’ll never feel okay investing in shares.
Those who are currently in or entering their 30s, if new to investing, have never invested through a market crash and their resolve is yet to be tested. If you invest in equities, know that eventually the market will test your conviction. Don’t fail.
At age 30, you should have most of your portfolio in shares. This is not to advocate rushing to invest in the first equity portfolio that you come across. That would be negligent. Do your due diligence and consult with an investment manager who’ll assist you in creating a well-diversified, low-cost, equity portfolio that will hold its own when the eventual crash comes.
The key to making money in stocks is not to get scared out of them – Peter Lynch
Increase your retirement contributions
You should already be contributing towards your retirement. Next, you’ll want to get into the habit of increasing your contributions consistently, either annually or when you get a bonus or a raise.
Check with your adviser to see if you can set up ‘auto-increase’, which allows you to choose the percentage you want to increase your contributions by and how often. This way, you won’t forget to up your contributions, or talk yourself out of setting aside a larger chunk.
Saving for retirement is all about taking a slow and steady approach. A little bit of money invested now can grow into a large sum of money over the course of 20, 30, or 40 years.
Improve your credit score
If you have bad credit, you aren’t alone. The good news is that you can do something about it. The best place to start is with a credit report.
Pull your credit report; you may be able to identify errors like late payments or active overdue accounts that have long been paid off. Removing these issues can lead to a noticeable bump and help you build some momentum.
From here, your focus should be on paying down debt, paying bills on time and lowering your credit utilisation rate. Getting that ratio down to 40% or less is ideal.
Evaluate your insurance needs
This one isn’t all that exciting, but it’s still very important. If you’ve gotten married, had kids, bought a house, or made any other major changes in your 30s, you should take a good look at your insurance needs and make sure you have the proper coverage.
Break in case of emergencies
It won’t take away any of the responsibility, but a strong emergency fund will help you sleep better at night. Most experts recommend saving around three to six months of your average living expenses, but hey – everyone must start somewhere. Commit to slowly building your emergency fund through careful budgeting, increasing your income, and making the most of unexpected money that comes your way.
And when it comes to putting your emergency savings to work, don’t buy the temptation to invest the money. Your emergency fund won’t give you any peace of mind if you’re worried about losing it all when the market tanks.
Instead, we recommend you stash it away in a high-yield savings account, where the money is safe but isn’t earning 0.01% interest. This is what your bank-offered money-market or fixed-deposit account was created for.
While your 20s may have been filled with lots of exploration, fun, hard work, and trial and error, that doesn’t mean you can’t start getting your finances in order in your 30s. Doing so will set you up for success, so you’re not starting from the ground up once you turn 40. Life begins at 40, not your financial discipline.