Your 30s can be filled with major – and expensive – life events. Getting married, buying a house and having children are all things that many people experience in their 30s. Not surprisingly, these events also coincide with the time when many people’s income is increasing. You are more likely to be in a stable career by the time you hit 30, and possibly advancing up the ladder now.
Many people find themselves playing a financial balancing game at this point. You probably have more money and more goals, but also more responsibilities. The important part is not to delay saving for retirement and building wealth in your 30s. If you need some motivation, just take a look at this survey by HSBC: In 2016, 38 percent of the world’s retirees said that those who put off planning for retirement until after age 30 have waited too long. Hopefully, you haven’t put off planning for retirement, but if you have, just know it’s never too late to get started.
So, let’s talk about the top ways you can build wealth in your 30s:
Be an active investor
At age 30, you should aim for saving 15% of your salary in your retirement savings vehicle. At a bare minimum, if your employer matches your contributions to your 401k, make sure you are investing the full amount that they will match. If your company offers a 401k matching program and you’re not contributing to your 401k, you’re essentially leaving free money on the table.
In general, most of your portfolio should be in stocks. And, at this point, if you’re not working with a financial advisor, it’s a great time to get started so you can have a solid financial plan and clear steps to achieve your financial goals.
Save in a Roth 401(k)
This is also a good time to investigate saving with a Roth IRA if you don’t have access to a 401k program through your employer or if you want to save more than you’re permitted to in a regular 401k. The main benefit of a Roth IRA is that you save with after-tax dollars, so, unlike with a regular 401(k), you won’t pay income taxes on withdrawals.
Since you’re likely in career-building mode in your 30s and you haven’t hit your peak earning years yet, being able to withdraw Roth IRA assets (your contributions, plus all the income they will have earned) tax-free when you retire can be very attractive, especially if there’s a good chance you’ll be in a higher tax bracket at retirement.
Pay off your debt
If you’re still carrying student loans and/or have accumulated credit card debt, it’s time to buckle down and pay that debt off. The money you are paying on these debts is money that could be going directly towards building your wealth.
Along with this, take a good look at whether you’re experiencing “lifestyle inflation”. Lifestyle inflation can be a serious wealth-killer! What does that mean, really? Well, the problem with earning more money is the temptation to spend that extra money on a bigger house, better car, or more “toys.” Resist that temptation and use that money to build your wealth instead. Remember that spending more does not equal more satisfaction or more happiness!
Maximize your earning potential
As I said before, you’re probably in career-building mode, which is great. It’s time to advance your skills so that you can increase your earnings (and wealth). If you haven’t gone back to school for an advanced degree, like an MBA or a master’s degree of some sort, look into it. You might even consider moving to a city where there are more opportunities in your chosen career field. Whatever you do, the key is to keep investing in your skill set, network, and take an active approach to maximizing your earning potential.
Keep your long-term goals in mind, have a solid financial plan, and follow the steps we talked about and in no time at all, you’ll be on your way to building wealth in your 30s!