How to Build Wealth in Your 30s

Author: Jeff Horner, Private Bank (Financial Planning) 05/27/2021

It’s all fun and games until you turn 30. Well, that may be a bit dramatic. But when it comes to your finances, your 30s are a great time to buckle down and start making moves. You may be buying a home or trying to save more for retirement. We’ve rounded up a few tips on how to build wealth in your 30s.

Spend less than you make

This may sound like a no-brainer, but if you spend more than you make, you’ll run into a deficit. To master the art of spending less than you make, a budget is key. You can find one online or free, easy-to-use budget templates in Excel. Look at the big picture to see where you’re spending your money. It sounds like simple common sense, but it really makes a difference. Budgets are eye-opening. You often don’t realize what you’re spending money on until you keep track of it. Numbers don’t lie. It takes effort, but seeing how you’re spending money can be a game-changer.

Don’t be afraid to revamp the budget that you may have used in your 20s. Chances are you’re making more money, and your life and expenses have changed. Your budget will have to adjust for life changes, such as getting married or having a child. You may need to cut costs in one area to make room in another. While you’re budgeting, it’s also best to talk to a financial advisor. There are good firms that will help young people without charging an arm and a leg.

Get rid of existing debt and monitor your credit

The less debt you have, the easier it will be to save money and build wealth in your 30s. This is also important because your credit score is affected by your debt. Remember that budget we were talking about? That helps to pay down debt, too. But recognize that there’s good debt and bad debt. A mortgage is good debt. Credit card debt is not so good, because it usually comes at a much higher rate. Let’s say you have a card with a $10,000 limit and you have a $5,000 balance. The more you have on that card, the more it affects your credit score.

When looking at your budget, if you have a credit card balance, write it down with your interest rate. Make it a priority to pay down that debt, because the interest you’re being charged is likely much higher than what you can earn on any savings or investments you have. It’s hard to beat the rate that you pay on the credit card. And make sure you pay it on time. Paying it late, even one time, can affect your credit score.

Tackle credit card debt first. Downloading a credit monitoring app on your phone, (i.e. Experian) can also help you monitor your credit. When you pay down your debt, you can track what it does to your credit score. And make sure to watch the transactions in your accounts to ensure you aren’t falling victim to fraud.

Pay yourself first

Most people have good intentions when it comes to saving money. You may promise yourself that you’ll put this much money in savings each month, but once you pay bills and extra expenses, the money is not there to save. If you pay yourself first, it means you’re building your spending plan around your savings instead of the other way around.

Go through your budget. When you see that you can save, for example, $500 a month, you should have that transferred automatically to savings each month. If you don’t do this, it’s human nature to spend what you see. If you move the money over first, then you have to go in there and move it back yourself. You’re less likely to dip into your savings unless you really need to. If it’s in your checking account, you’re more likely to spend it. It makes it too easy to encourage bad habits.

Increase your retirement savings

It’s rare that someone in their 30s has maxed out their 401K. Making it a goal to increase your retirement savings is key to building wealth in your 30s. The minimum you should be contributing to your retirement account is whatever your company matches. For example, if your company matches up to 5% of your salary, you should be contributing at least 5%. That’s the minimum. If you get a raise, put half of that money in your 401K. If you do it before you see it in your paycheck, you’ll never miss that money. If you’re comfortable and able to contribute to a Roth 401K as well, it’s recommended. Growth and distributions are tax-free.

Establish an emergency fund

It’s always important to prepare for the unexpected – a car repair, health issue, job loss. If you lose your job and don’t have the reserve, you’re in trouble. We recommend having 3 to 6 months of living expenses saved up. This gives you time to find a job with a cushion.

Take advantage of your company’s benefits

It’s important to earn a paycheck from your job, but don’t forget to also take advantage of the other benefits your employer offers you. For example, health insurance. Your company’s health insurance is on a group policy which is typically subsidized. It’s your most cost-effective option, and you won’t have to jump through hoops to see a specialist. You aren’t likely to save money on a plan outside of your company, and the coverage probably won’t be as good, either.

Pay for disability insurance. When you sign up for your benefits each year, this is an option that many young people skip over. But, you’re much more likely to become injured and unable to work than to pass away young. A long-term disability could keep you out of work for an extended period of time. Disability insurance will help you get back to where you were before your disability. It’s not a bad idea to also get your company’s life insurance.

We’ve given you a little advice on how to build wealth in your 30s. Now, it’s up to you to build good habits when it comes to spending and saving. To learn more, visit the Growing Your Career and Finances section on our website.

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