Many life transitions happen in your 30s—from moving up the career ladder to purchasing a home. With that in mind, you have to be smart about your money at this point to achieve future financial success. Apart from keeping your credit score high to get car and home loans, here are more financial tips for you.
Focus on the percentage of income saved rather than the dollar amount
When you were in your 20s, you used to earn $3,000 a month and saved or invested $900 of it. That’s a big chunk of your monthly earnings, so it’s impressive that you got to put that away every month. But what happens when you get higher pay as you get promoted in your 30s? What if you started earning $6,500 a month but only continued your $900 monthly savings or investment funds?
If you spent the extra money or disposable income, you became a victim of lifestyle inflation. That usually happens to people who start receiving higher pay and suddenly feel they need to upgrade their phone, car, and other lifestyle choices. If you’re not aware you’re doing it, this could hurt your financial plans.
It’s not as much about the dollar amount you save but the chunk of your income you put on your rainy or investment fund. By focusing on percentages, you can make sure you’re saving more as you earn more.
Diversify where you invest
You probably started funding your 401(k) and other employer-sponsored retirement plans in your 20s. That’s good. But that’s not the only way you should invest. Remember that retirement plans weren’t built for you to grow your wealth—they’re built as forced savings to ensure you can fund your retirement years.
When you’re a 30-something with more disposable income, consider exploring different investments. The right places to invest outside your retirement accounts depend on your financial goals. But options include stocks, real estate (rental properties), and taxable brokerage accounts. It’s best to talk to a financial planner who can guide you on how you can diversify your portfolio and pick where to invest your money.
Don’t spend more but spend better
With more money coming in, you think you can spend more. That is technically right. But what matters is where you spend that extra money. A good practice is to mull over what you value in life. Is it your family? Do you value your personal growth? Or do you also have a desire to give back to your community?
The more you align your spending with what you value, the happier you will be with what you purchase. For instance, if you highly value your family, spending thousands of dollars on a great home and other investments can make you feel happy and satisfied. That’s a good example of spending better, not more.
When you’re in your 30s, staying in line with your financial plans takes dedication and a few investment strategies. Also, since you’re experiencing many transitions at this point in your life while enjoying a higher income, you should focus on spending on things that can make you happy today and tomorrow.