Once you reach your 30s, being worried about graduating, starting a career and paying off your student loan debt is hopefully a thing of the past and been replaced by more domestic concerns. According to statistics, most people will have gotten married and/or bought a home—or have at least thought about it. And many of us may also be having kids soon (if you haven’t become a parent already). That’s a lot of new responsibilities and costs to think about when planning for the future.
Your 30s are the time to begin building lasting wealth to meet life’s growing demands
Here are six ways to focus your investing strategy as you navigate your 30s:
- Consolidate Your Investments
I come across many young people with no clear financial plan and with various small investment account scattered all over the place, which might include:
- An amount invested at the banks 32-day notice account,
- a Unit trust account started by their parents
- a couple of shares they’ve bought through their Easy Equity account
- a Crypto currency account on the advice of friends or influencers
- And perhaps some money in the bank they are unsure what to do with.
Now is the time to consolidate those investments. Pooling them in one place—with the help of a single advisor—makes it easier to see the role each investment plays in achieving your financial goals. It also will help you avoid redundancies and manage your overall risk.
2) Get Strategic with Your Debt
If you have debt, the strategies you put in place in your 30s can shape how quickly you can pay it off. There’s no precise formula for getting out of debt quickly, and your financial situation will dictate your exact priorities.
In general, I recommend paying off your debt in this order:
- Very High-interest debt (e.g., credit cards, clothing accounts).
- Student loan debt. (If you still have any left)
- Money owed to any friend or family member
- Paying off your car.
- Any business debt
- Paying off your bond
It’s critical to get as much of this debt behind you as soon as possible at this stage in life, but don’t neglect to invest while paying down debt. The rewards of investing are enormous when you start now.
3) Expand your Investment Accounts
By this time, you hopefully have started investing a portion of your monthly salary – I recommend 20% which you can split into these Investment vehicles, depending on your unique circumstances:
- An Emergency Fund: It’s important to have money on hand should an unfortunate event occur
- Investing for the short term: Whether you are planning your dream holiday, wedding, or buying a new car, make sure you save in advance.
- Saving towards retirement: If your company has a Pension fund, great, if not, start contributing to a Retirement annuity.
- Tax Free savings account: This is a great investment vehicle for long term goals, such as your child’s University fees
- Offshore investing: Diversify your money and take advantage of global opportunities
4) Make The Most of Your Cash
Investing while covering expenses can be a delicate dance, especially at a stage in life where financial responsibilities seem to multiply. The trick is figuring out how much you can put away while still having enough liquid cash on hand to meet immediate needs.
It is vitality important to have a Budget and have regular conversations as a couple. – In a previous post I talk about the 50/20/30 principle you can use as a guideline
5) Plan For The Unexpected
Over the course of your life, you and your family are bound to face some unplanned—even unpleasant—moments. Some of these can be financially crippling if you’re unprepared.
It starts with proper insurance coverage. Nearly everyone with a spouse, partner or child needs life insurance. You also need some form of disability insurance to protect you from an accident or illness that takes away your ability to work.
For many it’s a grudge purchase – and yes this won’t make you rich, but not have insurance can ruin you financially for the rest of your life. (I make it a non-negotiable for my clients)
6) Get Assistance
Many financial advisors have tools and processes to help improve your investment and financial planning outcomes. Research from Vanguard estimates that financial advisors can add roughly 3% in relative return for an individual investor over his or her lifetime.
Choosing an advisor that provides comprehensive financial planning —not just investment advice—can get your entire financial house in order and keep it that way forever. These financial professionals can proactively assist in estate planning, tax projections, insurance analysis, legacy planning, and more.
Perhaps most important of all, hiring a professional frees you up to do the things you love most in life and alleviates the stress that can come from managing your financial matters.
The financial decisions you make in your 30s will impact you for the rest of your life. With these strategies, you can plan for a successful retirement long before you near the end of your career.
Comments and questions welcome.
Geo Botha CFP®