When I think back on my early 30’s I realize I didn’t actively give a thought to my savings or finances. I was single so my career garnered all my attention. I worked hard, did well, and kept my housing costs low by buying a triplex in the low-cost city of Pittsburgh. In other words, I became the “accidental saver”.
Then in my mid-30s I married, had my first child and continued to work. Everything became a blur of kids, diapers, work and family. I didn’t have the time to plan my finances. Or, truthfully, didn’t make the time.
In retrospect, that was a mistake.
With money the one thing you have on your side in your 30’s is time. Time makes up for a lot of other mistakes. Consistent diligent attention to your finances pays off…. big time!
Saving should be your primary focus. If you are just getting started, you should target 15% of your pre-tax income. If you are employed and have a 401K that is the simplest place to start. Your employer will take it right out of your paycheck and make the investing simple. Your employer may even match your contributions which will enhance those savings. Your limit in savings in 2019 is $19,000. If your income allows, you could add to these savings by contributing to an IRA or Roth IRA.
Secondly, pay close attention to your taxes. Most 30 Somethings are dual income families and two incomes means more taxes. Minimizing Uncle Sam’s cut of your income is important. Your 401K is a start, and an additional IRA can help. If you own a business, look to a Solo 401K and profit sharing which would allow you to contribute up to $56,000. But also pay attention to tax credits, family and dependent credits, educational credits, home owner credits, health care credits, income and savings credits. They can add up!
If college or an advanced technical education is important to you to provide for your children start saving early! Early saving can reduce the amount you have to put away. If you begin when your child is born and save $300 consistently each month, you could have approximately half of their education savings by age 18…..wait 10 years you will have a third of that saved. But prioritize your savings. If you must make a choice between saving for college or saving for retirement, save for retirement. You can borrow for college but no one will lend to you for your retirement.
How do you know how to prioritize your savings? You craft a plan, a comprehensive financial plan. Set some goals, priorities, and quantify them. Adopt a budget that allows you to accomplish them. Financial success is accomplished with discipline. Just as if you were an accomplished athlete, it takes planning, practice, reviews and adjustments.
Finally invest with care. Understand your investing strategy. If your time is limited, use a professional. But meet with them often and understand your investments. Make sure your investments coincide with your risk tolerance and the time frames when you will need your money to be available. Pay attention to fees. Be sure that your advisor puts your interests ahead of their own.
Most importantly, start now. Plan consciously! Don’t become the “accidental saver”. The planning, saving, and investing you do in your 30’s will put you in control of your finances for your lifetime and not the other way around.