- Date : 03/03/2021
- Read: 5 mins
As you hit the 30-year milestone in life, it’s time to get serious about money matters and make certain financial moves that focus on building wealth.
Having a strict financial plan in place to secure your future is a definite accomplishment, but if you haven’t done this despite approaching your 30s, it’s time to sit up. By the time you enter your 30s, you would have gained additional responsibilities – you may change your career path, plan to get married and start a family, or wish to make a down payment on a house. To be suitably prepared, it’s essential to take control of your finances.
If you are wondering how to achieve financial freedom by age 30, here are some pointers that will serve as a guide.
Let’s take a look at 7 things to do before 30…
1. Plan for unforeseen expenses
It is important to identify any major upcoming expenses and strategise how to meet them. This will give you a clear picture of the amount you will need to save to cover them. For instance, you might want to buy a house or car, or pay for your child’s higher education. Planning early can give you a head start and allow you to draw up a road map for the small steps you must start taking.
2. Have an emergency fund ready
Unexpected expenses like household repairs or hospital bills can crop up any time. Or you could lose your job and be temporarily unemployed. You should have money easily accessible for such emergencies. Save up enough to meet a few months’ expenses and put it in an emergency fund; ideally this should be enough to tide you over for six months or even a year. Hold this money in a high-yield savings account or invest it in stable, liquid instruments for easy withdrawal in unprecedented times.
Related: Are you in your 30s? Avoid making these money mistakes
3. Draw up a household budget
This one is obvious and is often the first step to achieve financial independence by the time you are turning 30, as it lets you see where your money goes. Being aware of your spending habits will help you identify where you can cut expenses and save more. Draw up a plan to efficiently allocate your income between living expenses and financial goals such as savings and investments – and make sure you stick to it! Over time, you will be able to avoid impulsive and unnecessary expenses. Of course, as your income and expenses will likely evolve, you will need to accommodate these changes.
4. Learn to live within your means
Indulging in material things and enjoying experiences once in a while is great for a well-rounded life, but spreading your finances too thin can be a definite recipe for long-term disaster. Never empty your wallet by the end of the month; make it a habit to spend only the amount of money that your income can safely afford and learn to live within your means. This sound financial practice will serve you well for the future and you must adopt it early on.
Related: Tough financial situations we face in our 30s
5. Set aside a retirement corpus
Your 30s are a crucial time in your professional career, and chances are you won’t have given retirement a thought yet. However, in your 30s you still have time on your side, so don’t waste it. If you want a sizeable nest-egg to retire comfortably on, start your retirement planning early, even if you make only minimal contributions. Don’t forget to take advantage of your company’s retirement contribution and pension plan. The earlier you start, the more you will earn by way of interest.
6. Build a healthy credit score
Your credit score has the power to dictate almost everything finance-related in life. It determines the interest that lenders charge on your loans, and a good payment history means cheaper availability of credit. So work on building a good credit score; it translates into greater cash savings as you can potentially avail of competitive mortgage rates. A CIBIL score above 700 is generally considered good. Pay outstanding debt on time and keep your credit card balance below the recommended limit.
Related: 5 Insurance policies one must purchase before turning 30
7. Make regular investments
Structure an investment portfolio that aligns with your goals. In your 30s, you would be making rapid strides in your career and will be relatively far away from retirement. This gives you the liberty to take more risk with your investments. This means you should invest heavily in stocks. Alternatively, professionally managed mutual funds are a great diversified basket of securities that deliver high returns. You could also invest in low-cost index funds and tax-saving instruments. As you move towards your age 40, rebalance your portfolio by adding relatively safer instruments (such as bonds) to your portfolio mix.
Ultimately, what you must do is educate yourself about the importance of saving money and follow the suggestions above to gain financial independence. These steps, especially if taken early in your career, will surely help you stay in your comfort zone and set you up for a stable financial future. Look at these 10 smart financial moves for young earners.
Disclaimer This article is intended for general information purposes only and should not be construed as investment or tax or legal advice. You should separately obtain independent advice when making decisions in these areas.
Having a strict financial plan in place to secure your future is a definite accomplishment, but if you haven’t done this despite approaching your 30s, it’s time to sit up. By the time you enter your 30s, you would have gained additional responsibilities – you may change your career path, plan to get married and start a family, or wish to make a down payment on a house. To be suitably prepared, it’s essential to take control of your finances.
If you are wondering how to achieve financial freedom by age 30, here are some pointers that will serve as a guide.
Let’s take a look at 7 things to do before 30…
1. Plan for unforeseen expenses
It is important to identify any major upcoming expenses and strategise how to meet them. This will give you a clear picture of the amount you will need to save to cover them. For instance, you might want to buy a house or car, or pay for your child’s higher education. Planning early can give you a head start and allow you to draw up a road map for the small steps you must start taking.
2. Have an emergency fund ready
Unexpected expenses like household repairs or hospital bills can crop up any time. Or you could lose your job and be temporarily unemployed. You should have money easily accessible for such emergencies. Save up enough to meet a few months’ expenses and put it in an emergency fund; ideally this should be enough to tide you over for six months or even a year. Hold this money in a high-yield savings account or invest it in stable, liquid instruments for easy withdrawal in unprecedented times.
Related: Are you in your 30s? Avoid making these money mistakes
3. Draw up a household budget
This one is obvious and is often the first step to achieve financial independence by the time you are turning 30, as it lets you see where your money goes. Being aware of your spending habits will help you identify where you can cut expenses and save more. Draw up a plan to efficiently allocate your income between living expenses and financial goals such as savings and investments – and make sure you stick to it! Over time, you will be able to avoid impulsive and unnecessary expenses. Of course, as your income and expenses will likely evolve, you will need to accommodate these changes.
4. Learn to live within your means
Indulging in material things and enjoying experiences once in a while is great for a well-rounded life, but spreading your finances too thin can be a definite recipe for long-term disaster. Never empty your wallet by the end of the month; make it a habit to spend only the amount of money that your income can safely afford and learn to live within your means. This sound financial practice will serve you well for the future and you must adopt it early on.
Related: Tough financial situations we face in our 30s
5. Set aside a retirement corpus
Your 30s are a crucial time in your professional career, and chances are you won’t have given retirement a thought yet. However, in your 30s you still have time on your side, so don’t waste it. If you want a sizeable nest-egg to retire comfortably on, start your retirement planning early, even if you make only minimal contributions. Don’t forget to take advantage of your company’s retirement contribution and pension plan. The earlier you start, the more you will earn by way of interest.
6. Build a healthy credit score
Your credit score has the power to dictate almost everything finance-related in life. It determines the interest that lenders charge on your loans, and a good payment history means cheaper availability of credit. So work on building a good credit score; it translates into greater cash savings as you can potentially avail of competitive mortgage rates. A CIBIL score above 700 is generally considered good. Pay outstanding debt on time and keep your credit card balance below the recommended limit.
Related: 5 Insurance policies one must purchase before turning 30
7. Make regular investments
Structure an investment portfolio that aligns with your goals. In your 30s, you would be making rapid strides in your career and will be relatively far away from retirement. This gives you the liberty to take more risk with your investments. This means you should invest heavily in stocks. Alternatively, professionally managed mutual funds are a great diversified basket of securities that deliver high returns. You could also invest in low-cost index funds and tax-saving instruments. As you move towards your age 40, rebalance your portfolio by adding relatively safer instruments (such as bonds) to your portfolio mix.
Ultimately, what you must do is educate yourself about the importance of saving money and follow the suggestions above to gain financial independence. These steps, especially if taken early in your career, will surely help you stay in your comfort zone and set you up for a stable financial future. Look at these 10 smart financial moves for young earners.
Disclaimer This article is intended for general information purposes only and should not be construed as investment or tax or legal advice. You should separately obtain independent advice when making decisions in these areas.
