financial planning in your 30s

Strategic Financial Planning In Your 30s: Are You On Track?

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In your 30s, you may be settling into your career, creating a family, and building a foundation for your future. The decisions you make now can have a significant impact on your long-term financial well-being. In this blog, we discuss 11 practical financial planning tips to help you take control of your finances in your 30s.

What are some financial planning tips for professionals in their 30s?

1. Invest for your future self
When it comes to investing, your 30s are the perfect time to get started if you haven’t already. You still have many years ahead to take advantage of compounding interest. Consider contributing to retirement accounts such as a 401(k) or an IRA. The maximum contribution for a 401(k), 403(b), most 457 plans, and the Thrift Savings Plan is $23,000 for 2024. It might be difficult, but it is highly beneficial to max out your contributions during your 30s so that your savings can compound for several decades before retirement.

At the very least, it’s best practice to contribute enough to your workplace retirement plan (if available) to receive a matching contribution. This is essentially free money from your employer.
 

2. Make sure you have an emergency fund
An emergency fund provides liquidity and peace of mind during unforeseen circumstances. Up until now, you may not have had many financial responsibilities, but once you hit your 30s this can change. We live in an unpredictable world, so it’s essential to have a robust emergency fund. It’s best practice to have about six months’ worth of living expenses in a liquid, easily accessible account. 

3. Get rid of high-interest debt

High-interest debt can prevent you from being financially free. Prioritize paying off high-interest debt like unpaid credit card balances or personal loans. Getting rid of debt will allow you to save and invest more of your income. When people want to know which investments will lead them to financial freedom, paying off high-interest loans can be more advantageous than relying on exceptional investment results.

4. Avoid lifestyle inflation
As income increases, people’s wants and needs tend to do the same. We support allocating your money to things that give you joy. However, try to maintain a frugal mindset and resist the urge to upgrade your lifestyle with every increase in income. Automating savings can help you stick to a budget and avoid the temptation to spend “extra” cash on expensive purchases you don’t need.

5. Talk about money with your partner
By your 30s, you might be married, in a long-term committed relationship, or heading towards one. You’ll need to become comfortable talking about money with that person.

My wife and I have a money date once a month. We sit down for a nice dinner and go through the latest in our finances. It helps us stay on the same page, and we both feel like we are working together to achieve our financial goals.

If you aren’t doing something like this yet, see if you can make it part of your routine. These discussions can help you stay on track, make informed decisions, and address any financial concerns before they become major issues.

6. Review your insurance coverage

Insurance can often be forgotten when we have busy lives but it’s important to ensure you have adequate insurance coverage to protect yourself and your loved ones. Review your coverage regularly to make sure that your insurance still meets your needs and that you’re not paying more than you should.

7. Thoughtfully think about homeownership
Consider your financial readiness carefully if buying a home is on your radar. Several factors should be taken into consideration, including the housing market, mortgage rates, and your ability to deal with homeownership costs. The general rule of thumb is that housing costs should be no more than 28% of your gross income.

8. Prepare for kids and the cost of having them
If you plan on having kids, it’s a good decision to prepare yourself financially. That’s especially true if you’re planning to take a career break or don’t have paid family leave at work. If it looks like college is in your kid’s future, you may want to consider investing in a 529 college savings plan. This allows your child’s college savings to grow tax-free if used for education.

9. Set clear financial goals
Start by identifying your short-term and long-term financial goals. Having specific goals will help guide your financial decisions and motivate you to stay on track. Create a plan to monitor these goals over time.

10. Career development
Investing in your career can have a direct impact on your earning potential. You may be able to enhance your skills and make yourself more competitive in your field by pursuing further education or certifications. It may also be a good time to negotiate your salary. 

11. Budgeting

The last, but one of the most important tips, is to maintain a detailed budget to track your income and expenses. This will help you identify areas where you can cut costs and allocate more funds toward your goals and your future. Budgeting also provides a clear picture of your financial health and allows you to make informed decisions about your spending habits.

What should I be doing with my money in my 30s?

You should have a good financial plan in place by your 30s. Despite unexpected events, it would be good to know your short- and long-term goals and have a plan to reach them. A short-term goal may be planning to purchase a house to flip, while a long-term goal might be saving for retirement so you can retire early.

> Wondering where your next dollar should go? Find out here.

How much should you be investing in your 30s?

The exact amount that you should be investing in your 30s will depend on your situation. The general recommendation is to invest around 10-15% of your income, but that will depend on your situation. You can take advantage of the power of compounding if you invest more during your 30s. Invest as much as you can during your 30s to reap the rewards later in life. 

Should I get a financial advisor in my 30s?

Whether you should work with a financial advisor in your 30s depends on various factors, including your financial situation, goals, and comfort level with managing your finances. We generally recommend working with a financial advisor when at least one of these applies to you:

  • I am saving $1k/month or more
  • I make $120k or more (or > $220k as a couple)
  • I receive RSUs at work
  • I have $200k or more in invested assets or cash

Ultimately, the decision to get a financial advisor depends on your circumstances and comfort level with managing your finances. If in doubt, a free consultation with a financial professional can help you assess your situation and determine whether hiring an advisor is the right choice for you.

Is 35 too late to start investing?

It is never too late to start investing. If you are 35, you still have 30 or more years to take advantage of the power of compounding. It’s important to make sure that your investing strategy is right for your age. Your strategy will change as you grow older and your situation changes. 

Should I start a Roth IRA at 30?

Roth IRAs offer several advantages, including tax-free withdrawals during retirement. The earlier you start a Roth IRA, the more time your investments have to potentially grow. There is no age limit for contributing funds. Be aware of the income eligibility requirements and annual contribution limits set by the IRS.

How much money should a 30-year-old have in the bank?

The amount of money a 30-year-old should have in the bank can vary widely based on individual circumstances, financial goals, and the cost of living in their location. What matters most is having a financial plan that aligns with your goals and priorities. There is no one-size-fits-all answer. 

Contact a fiduciary financial advisor if you have questions about how much you should keep in the bank vs investing in other assets.

Questions from our financial planning community: 

  • What is the best thing to do to set myself up financially in my 30s?

Honestly, the best thing is to hire a fiduciary financial planner when you’re in your 30s. You will be making a lot of important decisions that will have a big impact on your finances. It’s best to have an expert in your corner at this stage of your life. A fiduciary advisor can give you detailed advice on all aspects of your personal finance, so you’re not leaving money on the table.

The second best thing is to do these five things if you can: 

  1. Have enough cash for emergencies, 
  2. Pay off all consumer debt, 
  3. Max out your 401(k), 
  4. Contribute regularly to a Roth or backdoor Roth to grow your money tax-free,
  5. If you’re doing the above four, invest excess cash in a diversified set of low-fee index funds via a brokerage account.

  • How aggressive should my 401(k) be at 30?

Ask yourself these two questions. First, how long before you need to withdraw the money? Since you’re in your 30s, it’s likely you won’t need it until more than 20 years down the road. Given this, you can invest your 401(k) more aggressively, because you can ride up the ups and downs of the stock market. But that’s just half of the equation.

Second, how do you react when you see losses in your 401(k) account? Are you tempted to sell everything in your 401(k) when you see in the news that there’s a huge stock market drop? If you get panicky easily, then you may not be able to stomach an aggressive 401(k) makeup. But if your instinct is to buy more stocks when they are selling at a bargain, you may be able to be more aggressive. 

  • How do I balance my retirement goals with saving for my children’s education? 

What is your parenting philosophy? Do you want your child to be student-loan-debt-free after they finish college? Or do you want them to work for their college degree and have buy-in? This will influence how you balance saving for your child’s college with your retirement goals.

One thing to remember is you only have one option to retire: to save. If you don’t save, you probably cannot retire at the normal age. Your child has several paths to pay for college, including getting a scholarship, working part-time, getting some student loans, or even enrolling in a community college first then switching to the state university.

  • I made some bad decisions in my 20s and it hurt my credit score. What can I do to improve my credit score in my 30s?

The good news is late payments or accounts in collection will disappear from your credit report after seven years. While you’re waiting for that milestone, here are three tips to improve your credit score in your 30s:

  1. Only use 1% to 10% of your credit limit. Credit bureaus like to see you use your credit card. But once you use more than 10% of your credit limit, your credit score will start to drop.
  2. Pay your credit card bills on time. Making on-time payments is a big factor in your credit score computation. If you accidentally make a late payment, call your credit card vendor immediately, and ask that they don’t report it to the credit bureaus.
  3. Don’t open more than one new card in a year. If credit bureaus see that you’re opening 2 or 3 credit cards in a short amount of time, they will see that as a red flag.

Your 30s are a crucial time to set yourself up for financial success

By setting clear goals, managing debt wisely, investing for the future, and prioritizing financial security, you can build a strong financial foundation that will benefit you in the years to come. If you are interested in a comprehensive financial plan, schedule a free discovery call with one of our fiduciary financial advisors today!

Best Financial Planner Washington DC

Alvin Carlos, CFP®, CFA is an investment advisor and fee-only financial planner, in Washington, D.C that works with clients across the country. He has a Master’s degree in International Relations from SAIS-Johns Hopkins. Alvin is a partner of District Capital, a financial planning firm designed to help professionals in their 30s and 40s achieve their financial goals through smart investing, reducing taxes, retirement planning, and maximizing their money. Schedule a free discovery call to learn how we can help elevate your finances.

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District Capital is an independent, fee-only financial planning firm. We help professionals and entrepreneurs in their 30s and 40s elevate their finances and maximize their money. We are based in Washington, D.C and we work with people virtually nationwide.

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