10 Financial Commandments for Your 30s
Your finances might have felt like a plague in your 20s, but thou shalt thrive throughout your 30s and beyond.
Our list of Financial Commandments for your 20s helped you find your financial footing and establish a solid foundation. Now that you're older and (hopefully) wiser, this list of goals will help you continue to build your wealth and blaze a path to financial security.
1. Advance Your Career
In your 20s, you developed a marketable skill. Now it's time to apply that skill to increase your earnings.
Research potential career paths for workers with your skill. Identify the types of jobs and companies that might be a good match for you. Consider whether you should obtain some additional training and development, either on the job, using free online courses, going back to school or through some other means. You might even consider moving to a city where you can find more opportunities in your field.
If you decide on a sharp career turn, understand that it can be worthwhile but also risky. You'll need a financial plan to keep your budget steady while you're changing course.
2. Rethink Your Budget
You established a budget in your 20s and perhaps accumulated some savings. But your income and expenses, as well as your needs, wants and dreams, will likely change from year to year. And your budget will need to adjust accordingly.
In other words, big life changes—such as moving, getting married, having kids or starting your own business—typically come with high costs. To ensure you can afford these transitions, you'll need to make room in your budget by identifying opportunities to save. And if you've gotten a raise or pulled in some extra income, you might consider ramping up your saving for emergencies (see commandment #5) and retirement (commandment #6). "It's a balancing act," says John Deyeso, a financial planner in New York City, who works with many young adults. "Once you get into your 30s, you have more money and more goals, so how do you spread that around?"
3. Adjust Your Insurance Coverage
As your assets grow, you may need more insurance to cover them. Maybe you rent a bigger or more private space now. Maybe you're buying a house (and need home insurance) or car (and need auto insurance). Maybe you have some loved ones who depend on you financially (and you need life insurance to make sure they're taken care of if anything happens to you). All of these situations call for additional protection.
Even if your situation hasn't changed, you should periodically reshop your insurance policies to make sure you're still getting the best deal. To compare auto insurance rates, try insuranceQuotes and CarInsurance.com. For life insurance, you can check rates at Accuquote and Insure.com. If you're changing jobs, be sure you understand your new benefits and how your health insurance premiums will differ from those at your old job.
4. Pay Off Nonmortgage Debt
In your 20s, you came up with a debt-repayment plan. Stick with it throughout your 30s, so you'll enter your forties focused on building your nest egg for the future—not paying off bills from your past.
5. Increase Your Emergency-Fund Balance
Remember, your goal is to maintain three to six months' worth of living expenses in your emergency fund. As your income and expenses go up, so should the amount in your emergency fund. Worried that all that liquid cash isn't growing as quickly as it might if it were invested in the stock market? Consider these ways to get higher yields.
6. Save At Least 15% of Your Income for Retirement
When you started saving for retirement, you may only have been able to contribute enough of your paycheck to earn your employer's 401(k) match. Or maybe you've allowed your 401(k)'s auto-enrollment policy to dictate the percentage that you save—typically 3%.
But experts recommend saving 15% or more of your gross income for retirement. The good news: Your employer's 401(k) match or contribution counts. So if your boss gives you 4%, you just need to save 11% on your own. Every time you get a raise, bump up your nest-egg contributions. If you get a bonus or extra cash as a gift, consider saving it for Future You.
Also start thinking about tax diversification, Deyeso suggests. Generally, if you benefit from a tax deduction now for contributing to a traditional IRA or 401(k), every dollar you withdraw in retirement will be taxed at your ordinary income-tax rate. By contributing or converting funds to a Roth IRA or Roth 401(k), you'll enjoy some tax-free income in retirement.
7. Diversify and Rebalance Your Investments
Now is the perfect time to diversify. "Once you get into your 30s and you have the basics [such as an emergency fund and other necessities] settled, you can take on more risk overall," says Erin Baehr, a financial planner in Stroudsburg, Pa., and author of Growing Up and Saving Up.
Typically, sticking with mutual funds and exchange-traded funds can work well for all investors, especially newbies. These types of investments offer much-needed diversification at relatively low costs. Index funds, in particular, are simple and relatively stable, making them a good choice for the core of your portfolio. Depending on your comfort level and your know-how, you might consider investing in some members of the Kiplinger 25, our favorite no-load mutual funds, too.
At this age, you should invest mostly, if not entirely, in stocks because of their greater potential for long-term gains. Among those stocks, you should diversify between large, midsize and small company stocks, as well as domestic and international picks. Also, you should periodically rebalance your portfolio to make sure you maintain your chosen allocations. Doing so will force you to buy low and sell high.
8. Monitor and Improve Your Credit
Checking your credit report and scores has never been easier. Your bank and credit-card companies may now allow you to do for free, and you can still visit AnnualCreditReport.com to view your report from each of the three credit bureaus for free every year. See Best Places to Check Your Credit Reports and Scores for Free for other trusted resources.
Regular reviews of your report could help you fix errors quickly, catch an identity thief at work or get on top of a potentially delinquent account. To dispute an error in your report, contact the credit bureau directly. If you notice a problem in one report, check reports from the other two bureaus as well.
9. Write Your Will
Not convinced of your mortality yet? Try waking up in your 30s after a night of heavy partying—the hangover alone will convince you that you are old and going to die soon. So it's time to write a will. Without one, complete strangers will decide how to split up your estate and raise your children.
You can make out a will on your own for $70 or less at a do-it-yourself Web site, such as www.legalzoom.com. If your circumstances are at all complex, you'll need a lawyer, who will charge about $300 to draw up a simple will and $1,000 to $3,000 for an estate plan that involves a will and a trust. Be sure to update these documents periodically to account for major events, such as the birth of a child.
Several other documents—a durable power of attorney, a release-of-information form and a living will—will help loved ones manage your care and your finances if you become incapacitated. "These documents are not just for old people," says Lauren Locker, a financial planner in Little Falls, N.J. "They are critical to your life planning and well-being." Gloomy as it might be to consider, it's better that you clarify all these things ahead of time rather than leaving it to your mourners to figure out.
10. Thou Shalt Not Covet Thy Neighbor's Stuff
Though not verbatim, this commandment comes direct from on high—delivered by both Moses and Knight Kiplinger. While the stone tablets warn about the sin of envy and its effect on your immortal soul, Mr. Kiplinger focuses on the financial repercussions: "The biggest barrier to becoming rich is living like you're rich before you are."
By your 30s, you should have a solid sense of what kind of lifestyle you can afford. And though social media and other advances in connectivity make it easier than ever to see what everyone else is doing and buying, you should resist the temptation of comparing yourself with others. If you try stretching your budget and taking on mountains of debt to keep up with your friends, family and the Kardashians, you're likely heading for financial ruin (and no closer to feeling content). So don't compare yourself or your stuff with others. Just focus on your financial goals, live within your means and be happy with your own life. You might even try being happy for your friends and family, too. (Just forget the Kardashians.)