Financial “To Do List” Series: Managing Money in your 30sApril 17, 2018
For our second installment in our “financial to-do list” series, we explore how to manage money effectively in your 30s. This includes building up your emergency savings account, assessing insurance coverage and more.
Entering your 30s? Odds are your financial situation is one that may be in a start/stop mode. You may be juggling quite a few different expenses such as mortgages, student loans, and possibly even child care.
With expenses mounting, you also are likely to have settled into a career and have started to build a nest egg. You still have time on your side to make big strides toward a bright retirement but you need to stay on track and not be wavered from your financial goals. You may not recognize it immediately but investing in your future now will pay off down the road.
Some steps you can take….
- Continue to build your emergency savings account. Your 30s might introduce greater financial responsibilities, likely a mortgage or children. The point here is that having an even greater emergency fund set aside is even more important. Everyone’s circumstances are different, however setting aside about 8-12 months’ worth of expenses is a good general rule of thumb.
- Once your emergency savings is funded, avoid letting extra cash sit in your checking account and invest it! This will give your money a better chance to grow and allow you a better chance to reach your goals. Establishing your saving goals will help you plan and invest accordingly. Maybe a goal is to save for a down payment on a house, maybe another goal is to save for a child’s tuition – having a clear plan will help you in making better decisions as to where you should invest your money and in turn make your goals more attainable.
- Continue to save for retirement. A simple plan is to try to put away as much as 15% into your retirement accounts (this would include any match you are getting from your employer). If you were not saving as much in your 20s, your 30s are where you should try to make up for lost time.
- Continue to pay down debt. At this point you should have made great strides in paying off student loans and paid off any outstanding credit card debt. It is never too late to get serious about eliminating debt. For credit cards, make extra payments on the highest interest debt first. Once that is paid off, apply that payment toward paying off other credit card debt. Having a plan will allow you to eliminate that nagging debt faster.
- Write a will. Many people do not think about this until after they have children but it is important to outline your wishes in the event of death. An extension of this, is to also write up a health-care proxy that explains your medical wishes and who is in control to make medical decisions for you should you become incapacitated. Revisit these documents every few years to make sure your intentions are still the same – things may change!
- Review your insurance coverage. Maybe you do have some insurance in place but do you have enough coverage? Perhaps your initial plan was purchased before getting married or buying a home? It is important to assess your current situation to make sure the right coverage is in place to cover those who rely on your financial support in the event something happens to you. Also, what would happen if you were to become unable to work due to a medical situation or an accident? Does your employer offer short term disability insurance? Standard policies may only cover 60% of your pay – likely not enough to cover all expenses in the event of an incident. In such cases, this might be a good time to consider a supplemental disability policy.
While entering your 30s may come with a whole new set of challenges, it is important to not lose sight of the fact that the way you handle your personal finances now becomes even more important. Remember, it is never too late to get started. Make a plan and follow it - face these changes and challenges head on. The more confidence you have in planning for your future, the more you will set yourself up for future financial success.
- Make a plan
- Aim for having 8-12 months of salary in savings
- Invest extra cash
- Keep contributing money to your retirement accounts
- Work with an attorney to draft a will and health care power of attorney
- Assess your current insurance coverage
Be sure to check out our first blog in the series, “Financial To Do List Series: Managing Money in your 20s” and read the rest of our Financial To Do List Series:
Questions? Contact a member of KLR Wealth Management, LLC.