As you move from your 20s into your 30s your lifestyle, priorities, and obligations shift. It certainly doesn’t happen at the same pace for everyone, but it’s generally true that things change.
Hopefully your earnings are increasing as your career moves though the gears, hence why the ages of 30-39 are generally referred to as the Accumulation stage of your financial life. However, there are potentially more demands on your income, something that has intensified recently with the challenges of the rising cost of living. You typically have more responsibilities too . Many people are looking to start settling down during this decade, buying a first property or starting a family, and it can be exceptionally difficult to juggle these substantial costs with planning for the longer-term future.
There is no one-size-fits-all answer to how to finance goals in your 30s because situations and objectives vary. But regardless of whether you’re a homeowner or renter, married with 2.5 children or single and partying in Ibiza, your 30s is also the time to begin building lasting wealth once some important foundations are in place. It can be confusing to know where to start, so here’s a list of priorities to consider.
Five finance goals in your 30s
1. Build your base
Your finances, just like a house, have to be built on firm foundations. Staying out of expensive debt and keeping your mortgage payments under control are the first steps, albeit this has become more challenging for many people as interest rates have risen over the past year or so.
Another important foundation is building a reserve of readily available cash to draw on in the event of an emergency. Three to six months’ income is often referred to as a rule of thumb, though if you now have kids to support, you’ll ideally want more to cover you if life takes an unexpectedly bad turn.
2. Protect your family’s future
Nobody knows what is around the corner, and there are additional building blocks to your financial security if you have started a family. If you are employed, you may have some of these often essential policies such as life insurance and critical illness cover provided for you as part of a benefits package. However, you should check the details of each policy and the level of cover provided to make sure they provide enough support for your circumstances.
If you don’t have them through work these insurance policies might seem like a monthly expense you could do without, especially when there’s still lots of fun to be had in your social life and travel plans. But provided you are healthy they can often be very cost effective and give you peace of mind.
You should also make sure you make a will so your money and possessions can be distributed according to your wishes if you die. In particular, it is worth noting that unmarried partners and partners who have not registered a civil partnership cannot inherit from each other unless there is a will, so the death of one partner may create serious financial problems for the remaining one. A will is also important to plan for children if either one or both parents die.
3. Get your retirement on track and take advantage of ‘free money’
If you are employed, you will be entitled to pension contributions made by your employer, as long as you keep opted into your work scheme and make the required level of contributions yourself. Although this isn’t a near-term priority when children and family finances are concerned, you should generally maintain this form of investing as far as possible as it is often the most efficient way to provide for retirement by some distance.
Your retirement can also get an extra boost from pension tax relief on payments into a personal pension. This contribution from the government can have a considerable impact on the size of your investment pot and the retirement income you can achieve, plus getting into the pension investing habit relatively early in life will really help you in the future.
The government will automatically top up your contribution with 20% basic rate tax relief. Higher-rate and additional-rate taxpayers may claim up to a further 20% and 25% respectively back through their tax return. Consider a Self-Invested Personal Pension (SIPP) for extra pension freedom and the ability to select from a very wide range of investments.
4. Set your goals and work towards them
Your 30s are a decade of multiple competing needs. To save and invest for the future in a methodical and efficient way it's important to set goals for different ‘pots’ of money and consider whether they are short-term or long-term in nature.
Shorter-term needs are generally considered to be less than five years, perhaps putting money aside for a new car or for a house deposit for example. Longer-term goals include getting ready for retirement or preparing for school or education fees likely to be incurred in at least five years’ time. Short-term needs are best addressed through saving cash and long-term ones through investing. Unlike cash, riskier assets do not offer security of capital, but over the long term, they tend to do better and therefore they build wealth more effectively.
Your goals not only inform on how to invest in your 30s, but also the appropriate type of account. Don’t forget to use appropriate tax ‘wrappers’ for your investing goals such as a pension for retirement, ISAs for earlier access and Junior ISAs for children’s longer term investing. By placing your money in pension or ISA wrappers you can save tax and make your investments work harder for you.
5. Start planning and investing early if you can
The realistic way to invest money in your 30s is little but often, and don’t underestimate the power of regular investing in meeting your goals. Even if you can only save a small amount each month, it will all add up. Time is the other critical factor. The earlier you start saving, the more time your money has to grow – thanks in part to the powerful effect of compounding.
It will also help to map out your financial goals – how much money you think you will need and when – to construct a plan to reach them. Once you have been through this exercise you will be able to better judge when you can meet these goals and how to plan your strategy. Of course, much can change for the better or worse so it is also important to be flexible. Maybe you have more or less disposable income to fund savings and investments than you thought. Perhaps your investments are doing better or worse than anticipated. A lot of assumptions have to be made with any plan and it is unlikely things will go exactly how they are modelled in advance. Yet having and a goal in mind, and a roadmap to meet it, will help keep you focused on it and better allow you to take corrective action where necessary.
Give your finances a health check
Balancing finances in your 30s is a challenge, but with some careful planning and budgeting you can set yourself up for a secure financial future. You also don’t have to tackle it on your own.
Having a conversation with a financial professional can help you to take control of your finances, giving you freedom and peace of mind. With our OneStep Financial Health Check you’ll get a consultation with a Financial Planner and a clear action plan to take home with you. Having a conversation with an expert can help you to take control of your finances, helping you find freedom and peace of mind.
Nothing on this website should be construed as personal advice based on your circumstances. No news or research item is a personal recommendation to deal.
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