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18 Essential Money Rules to Get You Through Your 30s

“When Melissa got her first post-college job, she thought she needed a nice new car and new clothes to match her career success.

She was able to find the car she wanted and a monthly payment she could afford. The catch was that she had to finance the car for six years instead of five, which added a lot more interest to the loan.

As for new clothes, Melissa thought it would be cool to have store credit cards for her favorite stores. The cards gave her discounts on her purchases, so she figured, why not? However, Melissa didn’t realize that the cards carried very high interest rates, and she made the minimum payments on all the cards.

In just a few years, she had managed to rack up about $20,000 in debt. “I had to get real with myself and understand that I was living a lifestyle that I couldn’t afford,” Melissa says.

Fortunately, after consolidating her credit card debt, refinancing her car loan and seeking help from her parents, she was able to pay off her debts in just a couple of years.”

That’s a financial mistake story about a 30-something, courtesy of Bankrate. The story was about Melissa, who is a senior investment associate. She’s 32. When I first read this, I thought I misread the title of the article. This has to be something a 22-year-old would do, not a 32-year-old… right? Wrong.

After I crossed into 30-land last year, I begun thinking of the mistakes I made in my 20s. I started thinking of what money rules I want to live by as I go deeper into my 30s. I’ve realized that our 30s are a crucial point in our financial lives. Our lives tend to change pretty dramatically. We have kids, move into bigger homes, have career changes, and often find new passions. Here are my top money rules to live by in your 30s:

Re-evaluate your retirement goals

Re-evaluating your retirement goals is just as important as having them to begin with. Your goals for retirement may have been different when you were in your 20s. I’m sure you also had a different risk tolerance and preferred asset allocation for your investments. For example, the hilarious and successful Jason Zook had three life goals when he graduated high school – all about retirement in some way. He later realized they were silly and took a completely different view on retirement.

Remember, create simple rules for yourself and visualize your goals. These two together will help you stay on course with your retirement plan. It’ll also allow for you to go back and re-evaluate at any time.

Save your money in the right places

According to The Motley Fool, the general “pecking order” of where you should stash your savings is as follows:

  • Employer plan with a match
  • Roth IRA
  • Employer plan without a match
  • Traditional IRA
  • Taxable investment
  • Annuity

I can’t say I disagree. I do think you should have at least 6 months of expenses in cash as an emergency fund before you follow this, though. For an even deeper dive, check out the article Kristin Wong from two cents put together on this topic. It has tons of curated resources, and I highly suggest you give it a read.

Fund your own retirement before your kid’s college

The cost of college is outright stupid. And it’s only going to increase. Deciding to pay for your kid’s college tuition is a noble gesture. It’s also one that requires a lot of planning and sacrifice. But your 30s are an important time to bolster your retirement savings. If you don’t, you might be working into your late 60s and beyond.

Save as much as you can. If you can save 5%, do it. If you can save 50%, do it. This Forbes article suggests that your retirement savings amount should be based on  your salary and age. According to their formula, by age 35 your retirement savings should equal your salary. So if you make $75,000 per year, you should have $75,000 in retirement savings by age 35.

I actually think this makes sense, and is a good target to shoot for. Now, if you want to retire early, you’re going to have to increase that number. Use this as a baseline, and adjust as necessary. Once you’re able to max out a 401(k) and Roth IRA, put money toward your child’s tuition using a 529 plan.

Don’t completely forget about junior’s education

Yes, you should focus on your own retirement first. But you also shouldn’t forget about your kid’s college all together. In my opinion, the best savings option for your child’s college tuition is a 529 plan. A 529 plan is an education savings plan that’s operated by the state (or some other institution). It’s purpose is to help parents put money away for college tuition. Savingforcollege.com put together some benefits to a 529 plan. See the full article for details, but here are their top 7 benefits:

  1. 529 plans offer unsurpassed income tax breaks
  2. Your own state may offer tax breaks as well
  3. You, the donor, stay in control of the account
  4. Low maintenance
  5. Simplified tax reporting
  6. Flexibility
  7. Everyone is eligible to take advantage of a 529 plan

There are different types of options to save for college. In your 30s, though, you’ll want something that has a lot of flexibility. That’s why I recommend a 529.

Maximize your company’s 401(k) match

You should be contributing to your 401(k) at least the amount your company is matching. It’s free money and just plain silly if you’re not funding it. The only time I don’t suggest funding a 401(k) is if you’ve got a serious case of financial denial.

Don’t miss out on the tax benefits of a Roth IRA

“With Roth IRAs, savers get a tax-free stream of income in retirement. And it’s not just the contributions that come out tax-free. Uncle Sam doesn’t lay a finger on any of the earnings. It can be a pretty sweet deal when you’re talking about decades of compounding.” – Bankrate.com

After you have met your company 401(k) match, do your best to max out a Roth IRA each year. The tax benefits are insane.

Pay attention to your investment performance

It doesn’t have to be every day, but you should check how your investments are performing. Personal Capital is a site I recommend to track your investments and your spending. Also, Matt Krantz of Dummies.com put together a nice list of resources for tracking your investments. Check that out for sure.

Buy a small, affordable home and small, fuel-efficient car

Your 30s are filled with plenty of life changes. The last thing you need is a giant mortgage and a ridiculous car payment. Many people in their 30s make much more than they did in their 20s, so they decide to upgrade their lives with that pay increase. Joshua Becker, author of Becoming Minimalist gives us the following 12 reasons why we’ll be happier in a smaller home:

  1. They’re easier to maintain
  2. You’ll spend less time cleaning
  3. They’re less expensive
  4. You’ll have less debt and incur less risk
  5. It’s mentally freeing
  6. There’s a lower environmental impact
  7. You’ll have more time
  8. It encourages family bonding
  9. It’ll force you to remove baggage
  10. You’ll be less tempted to accumulate “stuff”
  11. You’ll have less decorating
  12. There’s a wider market to sell

Make sure you read the full article for all Joshua’s details. I think he does a great job summing up why you should be living in a small, affordable home in your 30s.

As for cars, you don’t need a gas-guzzler. With all the other expenses coming in your 30s, the last thing you’ll want is a big-ass, costly car. Find a small, fuel-efficient, used car. I drive a Honda Fit and I couldn’t be happier. It gets close to 40 mpg and I can park that sucker anywhere. Not to mention it has plenty of cargo space for anything that my 30s will throw at me – like a baby stroller.

If you want to take your game to the next level, ride a bike instead of driving a car. You’ll save a boatload of money and the environment will thank you.

Don’t assume you’ll make more in the future

You might be going into your 30s single or married with no kids. Both of these situations can cause an artificial view of what kind of lifestyle you can live (and keep up). Don’t assume that you’ll be making more money down the road to make up for it, either. This is a common mistake that many 30-somethings make and it comes back to bite them in the ass. As Stefanie O’Connell says, “One common assumption among young professionals is that salary will always increase. While this may have been a rather safe supposition in the past, the job market and economic climate of the past six years has proved otherwise.”

O’Connell also states some bigger issues that can come from assuming you will have more money in the future:

“The other big downfall of assuming higher earnings in the future is waiting to plan for long term financial goals, like retirement and savings, until bigger paychecks start coming in. Pay increases generally take time, and the more time that passes, the more financial demands tend to increase- weddings, homes, babies, schooling, etc. If you don’t prioritize saving on your current income, you’ll keep finding excuses to put off financial goals – even as your future income increases.”

So instead of living beyond your means while you can, try creating a false sense of scarcity by socking away 50% of your income.

Pay off your credit card debt

As Mr. Money Mustache puts it, your debt is an emergency. If you’re still carrying credit card debt into your 30s, now is the time to buckle down and get rid of it. Don’t do something stupid, though. Don’t tap into your retirement account to pay off debt. Don’t borrow more money to pay off debt. Instead, cut back on your spending (go on a spending fast if you have to) and start putting as much as you can toward your debt.

Don’t waste time keeping up with the Wantlings

Read this article. Don’t be a Wantling.

Make the basic estate preparations

You’re not going to live forever. And by the time you hit your 30s, you’ll probably get married soon, if you’re not already. You’ll probably also have kids, if you don’t already. If you’re not taking the proper measures to protect your family, you’re an idiot. Now is the time to do this. In this article, Michele Lerner from DailyFinance gives us 6 of the best estate planning moves we should be making in our 30s. Be sure to read her full article for the details, but here are the moves she suggests:

  1. Last will and testament
  2. Living will
  3. Durable power of attorney
  4. Health care proxy
  5. Life insurance
  6. Retirement fund

Having a will is important once you have a family, as is life insurance. Building a retirement fund is also crucial – but don’t wait until your 30s to start.

Don’t overspend on your kids (especially the first one)

Your 30s will often come with having a bigger family, which also means more expenses. It’s easy to spend a ton of money on your kids, especially your first one. In fact, we just registered for our baby shower and the woman told us someone came in and registered for over $15,000 worth of baby supplies (yes, $15,000!). We tend to get so excited about the new addition that money seems to become no object. It doesn’t stop when our kids get older, either. Here’s a list of 12 ways you’re overspending on your kids, courtesy of Allison Martin of credit.com:

  1. Child care
  2. Vacations
  3. Paying full price for everything
  4. Throwing out stuff your kid doesn’t need
  5. Birthday parties
  6. Entertaining outside of the home
  7. Competitive sports leagues
  8. Prestigious summer camps
  9. Meals they won’t eat
  10. Never buy used
  11. Pay for tutoring
  12. Electronic baby-sitters (this is a big one)

As always, please read Allison’s full article here for more details on these tips. The point is, watch what you’re spending on your kids – newborn, toddler, or a kid in high school. It’s easy to feel a sense of guilt if you’re not giving your kid everything they ask for. But you have to consider the long-term impacts it’ll have on your finances.

Get the right insurance

By your 30s, you should already have the following insurance:

  • Health
  • Auto
  • Renter’s/Homeowner’s

Two crucial insurance plans you’ll want to have when you reach your 30s are long-term disability insurance and life insurance. Both of these types of insurance will replace your income for those who need it (your family) in the event something unfortunate happens. Like if you become disabled or you die. I know it’s morbid, but it’s life. Let’s not forget, you’re an adult now.

If you don’t have kids and your spouse is working, you can hold off on these for a little longer. But as soon as one of those things happen you’ll need both. Both are usually offered through your employer, but the coverage may not be enough for you. To get an idea of how much insurance coverage you need, head over to Life Happens. It’s a nonprofit organization that offers a handy calculator for this situation.

Get married at a reasonable cost

$28,000. Oh sorry, I thought you asked me how much the average American wedding costs. It seems as if getting married isn’t even about getting married anymore. It’s a charade. It’s a big party, and for some reason we find ways to justify spending this kind of money for ONE DAY. I’ve heard things like:

“I deserve this”

“It’s my special day”

“It’s only one day”

“You only get married once”

None of those things justify spending upwards of 30 grand on a wedding. One article from the Wall Street Journal says that “…the contemporary wedding marks the move from one type of consumer to another.” So true.

Ramit Sethi, the blogger and author of I Will Teach You To Be Rich, says that we can always have a simpler wedding that’s less expensive. If that’s not an option, instead of just “figuring it out later” we should be budgeting and planning for such a big expense. He gives the following 3 recommendations for this:

  1. Be realistic
  2. Set up an automatic savings plan
  3. Prioritize, because you can’t have the best of everything

Be sure to read his full post here, which goes into more depth.

Talk about money with your spouse – before and after you’re married

This is a huge problem with married couples. According to this study done by Kansas State University, arguing about money is the top indicator of divorce. And this survey showed that 43% of the people who responded didn’t know their spouses salary, or they guessed the wrong amount. So it’s pretty obvious that you need to talk about money with your spouse (or future spouse) to build trust and transparency.

KeyBank lays out the following 6 financial mistakes that couples tend to make:

  1. Merging finances. Instead of thinking about your money individually, you should look at your money and your spouses money as your money together, collectively.
  2. Dealing with debt. Don’t look at debt as something that will destroy the relationship, instead try to figure out how to pay it off effectively together.
  3. Keeping spending in check. A lot of times there’s a spender and a saver in a relationship. Quit beating up on each other and instead budget (or if you’re like me, use the no-budget budget).
  4. Investing wisely. Many times, one or both of you don’t know much about investing. You also may have different risk tolerances. You should learn the basics and decide what your time frame to retirement is, as well as how much risk you can agree to take on, together.
  5. Keeping money secrets. Hiding big financial secrets can destroy a marriage. Be open and honest with each other and don’t hide your purchases and debts.
  6. Emergency planning. Some people are carefree with their money and don’t think anything bad will ever happen. Other people build a bomb shelter under their home. The key is to find balance. Talk to each other about planning for emergencies and figure out what works for both of you.

So whether you’re engaged or already married, talking about your finances can be an important step in your marriage. You might even find this financial compatibility quiz from Fidelity helpful.

If you’re going to go to grad school, do it for the right reasons

Elite Daily says that people are “…using grad school to delay the onslaught of the real world. They’re too afraid to face it or don’t feel ready enough because they’ve clung to the statistic that told them that if they are a grad student they will get paid more and they will get hired faster.” The average age of a grad school student is 32. Odds are if you’re going to go to grad school, you’ll do it in your early 30s. Just make sure you’re doing it for the right reasons.

Peterson’s put together a nice list of pros and cons for going to grad school. Here are just a few of the right reasons for going to grad school that they give:

  • Greater earning power
  • Advance your career
  • Career change
  • Enhance your education
  • Get research opportunities
  • Enjoy travel opportunities
  • Find teaching opportunities
  • Employer incentives

The full article lays out 20 pros and 15 cons for going to grad school. If you’re serious about it, this is a good article to help you decide if it’s the right decision.

Diversify your income

It’s never too late to pick up a side hustle. In your 30s, you might be paying for stuff like kids, a bigger home, and a minivan. On top of this, you’ll want to ramp up your savings for retirement. So find a way to make some extra money on the side. There are only 2 resources you need for finding a side hustle:

  1. Side Hustle Nation
  2. J. Money’s Side Hustle Series

Side Hustle Nation is operated by Nick Loper and he’s the guru when it comes to picking up side hustles. His blog is great and he even does an excellent podcast. J. Money owns BudgetsAreSexy and he does a series on his blog called the Side Hustle Series where people actually doing that side hustle write about what it’s like. Again, these should be the only 2 resources you need to pick up a legitimate side hustle. Have fun.

Money rules from the readers!

Below are rules that you guys have added. Please keep them coming and I’ll add them to the list. My goal is to build a big list of money rules we can all live by!

Establish savings goals as early as possible

This one comes by way of Steve from ThinkSaveRetire:

“For example, save at least 10% of your income. If your spouse works too, save 10% of that income as well. The 10% number can change, of course, but the larger point is having a savings goal and meeting it each month – baring any emergencies.”

Automate as many things as possible

Our Next Life adds that we should be automating as much as we possibly can in our 30s:

“We don’t think about saving, investing or paying our bills — it all just happens. And it gives us our high savings without ever having to think much about it.”

Have YOUR OWN PLAN

Maggie from Northern Expenditure says the one rule she continues to harp on is to have YOUR OWN PLAN:

“It’s easy to say “save money” or “plan for retirement,” but that puts you on a default path. Better that path than no path at all. But you need to define your own path. What does retirement for you mean? When will it be? What will it involve? What would YOU do if you retired tomorrow? Plan for that instead of some vague notion of retirement for some old person in the future you don’t really know. Future you will still be you!”

Do what works for you, and act on it!

Tommy from LeisureFreak reminds us that our financial goals are as different as we are people:

“…everyone’s plan and rate of debt elimination and investment/net-worth growth will be as varied as there are people. Take this Money Rules list and apply all that you can to your own strategic plan and then ACT on it. Living below your means still allows people to live their lives but with a smarter financial focus and the freedom it brings makes it all worth it.”

I want your rules, too!

So there you have it. A massive list of money rules to live by in your 30s. This certainly isn’t all-encompassing though. I’d like to ask all of you reading to add in any money rules for your 30s in the comments below and I’ll add them to the list!

 

Chris Muller
 

Chris is the founder of Money Mozart, a blog about personal finance. He discusses frugality, minimalism, and achieving financial independence by living well below your means. He's also an avid craft beer lover and an aspiring minimalist.

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