6 Financial steps to take in your 30s
You've reached the age of 30! Your wild-and-free 20s are behind you, and you're probably feeling a greater sense of stability in your career, your identity, and hopefully your relationships. With all of these changes that happen your 30s, it’s important that you also set some new financial goals and continue to be responsible with your money. If you take these six steps this decade, you should be in a great position once your 40th birthday arrives!
1. Make a New Budget to Meet Your Current Goals
While it's good to assess and adjust your budget monthly, once a decade or so, you should really do a complete budget overhaul. The budget you've been working with and tweaking since you were a 25-year-old grad may no longer suit your needs. Your budget overhaul should start with some careful consideration of your goals. Maybe you want to start a family in the next year or two, or perhaps you want to upgrade to a larger home. Write your goals down, and then design a budget that will help you meet them. This might mean allocating less money to the "entertainment" category and more to the "savings for home" or "savings for children" category.
2. Buy Life Insurance
Sure, you may have slid by without life insurance in your 20s, but now that you're 30, you really need a policy to protect your loved ones in case something were to happen to you. You don't want to leave your spouse with thousands in funeral costs. A basic term policy should suffice in most cases. It's cheaper to buy a policy in your 30s than in your 40s, 50s, or 60s.
3. Increase Your Emergency Fund
As your life becomes more complex with property ownership and perhaps children, it's important to have more money set aside in case of an emergency. An emergency fund of $5,000 may have cut it in your 20s, but in your 30s, you really should have at least 3 months' living expenses set aside in case you lose your job or suffer some other major setback. Add a few hundred dollars per month to your emergency fund; it will grow faster than you think.
4. Max Out Your 401K
If you’re already maxing out your retirement contributions, then you're ahead of the game. But if you're still contributing only a small amount (or not contributing at all), it’s time to start taking retirement more seriously. If you wait until you're 40 to get serious about retirement, you will miss out on a lot of compound interest. You may have to rework your budget a bit, but make maxing out your 401k a top goal.
5. Diversify Your Investments
In your 20s, it was good enough to be investing at all. In your 30s, you should aim to diversify your investments. This gives you added stability as the market fluctuates. If you're invested in stocks, for example, make sure you own stock in some small, mid-size, and large-scale companies. Buy some international stocks and other domestic stocks.
6. Pay off Non-Mortgage Debt
Now that you hopefully have a higher, more stable income, one of your financial goals should be to pay off any debts other than your mortgage. This will save you a bundle in interest. Budget so that you're able to put a few hundred extra dollars towards the principle on any loans each month.
Your 30s should be a decade of increased stability and comfort—when it comes to your finances, too! Setting some smart financial goals will get you there.