In his role as Financial Planner, Andrew forges lifelong relationships with clients. He coaches them through all stages of life and guides them to better achieve their life goals. For more information about Andrew or the other firm partners, Kyle Hill and David Levy, click the link below.
By: Andrew Rosen, CFP®, CEP® Many of our client’s children are entering their pivotal 30’s from a planning perspective. These years are an interesting decade full of change and promise. You still have some youth left, but those carefree days of your 20s are firmly behind you. Typically in your 30s, you’ll get to experience marriage, parenthood, and hopefully career advancement. These major life events cause an increased need to get your financial house in order. Below are my 12 steps for financial planning in your 30s. 1. Maximize those retirement plan contributions. A common theme in my blog is to maximize your 401(k). Without question, the clients I see in their later years in great financial positions are those who maximized their retirement plan contributions early. Compound interest over time is a magical thing. Together with these plan’s tax benefits, you’ll find yourself destined for success. 2. Plan for debt. While in your 30s, you’ll need to fully understand the difference between constructive and destructive debt. Have a plan to both eliminate and bypass destructive debt (such as credit cards). Equally important though is understanding constructive debt. You’ll need this type of valuable debt to purchase a home, car, or even a business. To give yourself a crash course on the subject, I recommend talking to an expert in debt planning. This person can help make sure you keep a prudent debt plan. 3. Lock in that insurance plan. Our family structure is mostly complete in our 30s. The same is true of our finances, as well. Being relatively young and healthy, this is the perfect time to acquire those critical insurances (such as life and disability). Take advantage of procuring a good amount of life and disability insurance while it is still relatively inexpensive. If done correctly, you may never have to adjust these insurances for the rest of your life. 4. Get those estate plans in order. Sticking with the theme of beginning a family, what better time to get a proper estate plan in place. Dying intestate (without a will) is the last thing you want to do. It leaves your heirs with a mess to deal with. Worse, it may leave your children without an official guardian. Other important documents that come with a proper estate plan are: financial power of attorney, health care proxy, and others. 5. Make those big career moves now. Hopefully by now you are approaching double digit anniversaries in your working career. If so, you probably have eclipsed Malcolm Gladwell’s “10,000 Hours to Become an Expert” threshold. This makes you valuable with employers; be certain you are being compensated as such. If your current employer isn’t recognizing your value, it’s time to move on. Those that get stuck in an underpaid and underappreciated position aren’t as marketable to a new company. Companies want to hire movers and shakers. A new employer will judge you largely on what you’ve accomplished professionally. Their main measuring stick is your title and income. 6. Budget. Creating a budget now will not only create a valuable life habit, but also allows you to focus financially. There are numerous resources to help you create and stick to a budget. Some budget every dollar to the penny. Some budget loosely (such as you bring home $7,000/mo, save $1,000, and spend $6,000). As long as you have some systematic checks and balances in place, you’ll be poised for success. 7. Avoid lifestyle creep. I see lifestyle creep often with people in their early 30s. Your income and careers are advancing, yet your saving goals aren’t. They begin saving $1,000/mo. But, by the end of their 30s, they are still saving the same $1,000/mo despite making twice as much. If you’re enjoying this new and improved lifestyle, you better find a way to save in lockstep. You don’t want to take a step backwards in retirement. 8. Automate everything. Personally, I have everything automated: savings, investments, even bills. This way I know that I am consistently saving for each of my financial goals. As my life gets more complex, I make sure I pay all my obligations. This is easy to setup and will go a long way to keeping it simple. 9. Create an investment plan. Hopefully in your 30s, you have started to accumulate some form of wealth. Now it’s time to treat it with the importance it deserves. You’ll want to create (or work with someone to create) a true investment plan. It is important to monitor this plan and readjust as needed. Without a true focused investment plan, you may be missing out on years of growth or become overly exposed to one sector. Know your tolerance for risk and structure investments accordingly. A well thought out investment plan can have an immense effect on your long term, goal-achieving ability. 10. Appreciate the value in outsourcing. Outsourcing is a lesson I learned long ago. I’ve come to realize that time is my most valuable resource. Take, for instance, mowing my lawn. I know that time spent at my job is tremendously more valuable than time spent on my lawn. If I can spend that extra hour with my family, the nominal cost of hiring someone to mow my lawn is the best money I can spend. All your time is valuable. So, assign it a dollar value. Now, think of how you spend your time. Finally, give a dollar value to the activities you are doing. Reevaluate the total awake hours you have in a week and start outsourcing everything that doesn’t hit your minimum time-to-value formula. Remember to account for things you are not doing that should be getting done. There is incredible value in working with experts in the areas you no longer can or will do yourself. Not only will most of them do it better and quicker, but I’ve often found all things considered they do it cheaper as well. 11. Create an emergency fund There is generally a lot of transition in life, especially with all the changes occurring in your 30s. Create an emergency fund which can give you easy access to cash (without going into debt). Three to six months reserve is typically recommended, but every situation is certainly unique. 12. Create a financial and life plan. These two things are attached at the hip. You can’t have a life plan without a financial plan to support it. And, you can’t properly plan financially without knowing what you are planning for. This doesn’t mean you need to have all the answers, but I do highly suggest giving this some real thought. Either do it yourself or outsource to someone with the skillset to help guide you. Regardless the old saying holds true: “Those that fail to plan, plan to fail.” Whether reading this as a 30 something or sharing with your 30 something children your 30s will come and go before you know it. Life pulls us in a million different directions. Hopefully, you can follow these simple tips and be well on your way to success!